KARACHI, Feb 23: The government has allowed a 25 per cent freight subsidy on exports of leather garments for a period of one year, starting from January 1 to December 31, 2005.

According to an Export Promotion Bureau official here on Wednesday, this subsidy had been provided to leather garment exports as a 'special incentive' to overcome the problem facing this sector and enable its exports to be competitive in the international market.

He said that this was the outcome of meetings of leather garment producers and exporters with Commerce Minister Humayun Akhtar Khan in December last year and early January.

The association had submitted a 'survival package' with the minister and sought several incentives in this regard. The demands included the payment of duty drawback, restriction on the export of raw skin and wet blue leather, payment of freight subsidy on leather garments exports, market access to Russia, participation in exhibition, installation of machinery and research and development.

The EPB official said that freight subsidy was usually paid to those sectors where exports were less than $5 million or to markets where exports volume was less than $10 million. But the nature of crisis facing leather garments industry is peculiar and therefore this sector has been allowed a 25 per cent freight subsidy to make it competitive in the international market.

The EPB official pointed out that a formal approval from the ministry of commerce had been received and the subsidy would be provided on both against C&F and FOB exports.

He said the Pakistan Leather Garments Manufacturers and Exporters Association (PLGMEA) would scrutinize the claims of leather garment exporters before they were filed through commercial banks.

PLGMEA has claimed that the exports of leather garments had declined by 28 per cent to $132 million during the six month period (July-December 2004), as compared to $185 million in the corresponding period last year. Conversely, the exports of leather surged by 16 per cent to $135 million during the period under review. -APP