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Plastic Goods Industry

Misuse of bond facility hurts genuine raw material importers

Star Business Report
v With raw materials of plastic goods ■’ imported under bond facility flooding the local market, genuine importers are being affected in the ■ face ofuneven competition with the Unscrupulous traders.
According to sources, some ■corrupt customs officials are involved in issuing bond license in ■favour of a section of traders who do ‘hot have any production unit. These traders are importing raw materials under bond facility and selling them in the local market to make money overnight, sources said.
An importer needs to pay a total of 42 percent duties and taxes including 15 percent import duty, 15 percent value-added tax (VAT), four percent development surcharge and three percent advance income tax (roughly Tk 27,000 per tonne) to import polyvinyl chloride (PVC), polypropylene, polyethylene - the basic materials of different plastic products. But there is no duty when these are imported under bond facility for the fully export-oriented industries.
"In fact, high duty on these raw materials is one of the reasons for which bond facility is being misused," said a source adding that countries such as India. Sri Lanka. Pakistan have still kept duty low on these items to check illegal import
After formal duty payment, import cost of plastic raw materials 'amounts to around Tkl.14 lakh per tonne but the cost stands at Tk 78,000 when imported under bond facility.
Including payment of all duties iiiind taxes, import cost of one bag of raw material amounts toTk2,830but raw materials are sold at Tk 2,400 per bagin theopenmarket, sources said.
Even the policy, and. decision ■makers know about this malpractice
and finance minister in his budget speech for the FY2003-04 also mentioned it.
According to National Board of Revenue (NBR) notification, export-oriented companies, which import these items should mention 'Import Under Bond' while opening letter of credits (L/CS). But these venal traders do noteven botherto mention it.
The NBR statistics shows that raw material import in January and February this year soared unusually high and relatives of politically influential leaders own some of the companies that imported goods during this period.
Against this backdrop, the NBR issued a statutory regulatory order (SRO) imposing some restrictions including a 100 percent bank guarantee in releasing imported goods hoping that it would make the process more transparent However, a 25 percent bank guarantee was
made effective later for mysterious reason.
The government’s revenue Income during July-March period of the current fiscal fell about Tk 2,000 crore short of target. The shortfall has been mainly ascribed to a much higher increase in tax-free imports compared to taxable ones, the finance minister observed recently afterameetingwithlheNBRoflicials.
The NBR approximately earned Tk 100 crore as dudes from the import of plastic raw materials in the first three months of the current financial year. "But revenue income from these items has dropped heavily in the following months as the process affected the legal imports," explained a member of Bangladesh Polymer Importers Association (BPLA).
On the other hand, imports of raw materials under the guise of duty-free bond facility have
increased substantially in recent months and flooded the local market, he added.
To Stop misuse of bond facility, a high-powered committee with representatives from chambers, importers and NBR should be formed for issuing bond licenses, BPIA earlier recommended the NBR.
Before issuing bond license in favour of any importer, the authorities concerned should investigate respective plants, production capacity, number of employees in the factory and legal electricity connections, which would help them to be sure whether the importer is a genuine one, the association suggested.
Checking illegal import of plastic raw materials through stern actions would help the government earn additional Tk 500 crore from these items, the association observed.