KARACHI, June 28: The textile industry is asking the government to announce a concession and incentive package of Rs50 billion so that it can compete with India, China and Bangladesh in export market. For pleading this case, a leading exporter Mushtaq Cheema is locking horns on Thursday with the seasoned bureaucrats of the finance and commerce ministries and officials of the State Bank of Pakistan at a meeting to be chaired by Prime Minister Shaukat Aziz.
Prepared and designed by a 15-member committee of the textile industry leaders in April, the incentive package failed to evoke any sympathy from the finance and commerce ministries as the budget-makers ignored it completely in June. The prime minister, after getting a presentation on the package on May 30, is understood to have advised the textile industry leaders to “revisit and review” their proposals. Prime Minister’s adviser on finance Dr Salman Shah snubbed textile industry leaders in a post-budget seminar held in mid-June in Karachi and wondered as to from where resources would come for social sectors if Rs50 billion in the budget are given to the textile sector.
Well placed business sources confided to Dawn that the prime minister has held an informal meeting with about half a dozen top leaders of the textile industry on Wednesday so that he is well-equipped with facts and arguments for a formal meeting on Thursday, which State Bank Governor Dr Shamshad is also expected to attend to respond to the proposals that seek concessions on interests on bank loans.
The break-up of Rs50 billion concessions and incentives makes an interesting reading. The textile leaders are seeking Rs10 billion concession on gas tariff, Rs7.30 billion on captive power, Rs8 billion on export refinance cost, Rs6.35 billion for reducing Kibor on all long- term loans disbursed on or after January 1, 2003, Rs1 billion on 10 per cent financial support for capital investment in textile industry, including second hand machinery, Rs0.6 billion by reducing customs duty to zero on import of all textile machinery, spares, generators for captive power and its spares, Rs5.40 billion by introducing a flat rate withholding tax of 0.25 per cent on exports of textiles instead of a multiple rate, Rs1.35 billion by discontinuing export development surcharge (EDS) at 0.25 per cent on all textiles, extension of 6 per cent research and development (R&D) facility to all processed fabrics, garments and made-ups, including home textiles, and Rs3 billion for garment exporters to help them in market access support programme at the rate of 5 per cent of the fob value.
The main argument of the textile industry leaders is that the governments in Bangladesh, India, China and other countries are offering open, hidden and not so hidden facilities and concessions to their textile industry as it is the main employment generator and hence a key factor in poverty alleviation. Pakistan textile leaders want to take country’s textile exports to $24 billion by the year 2010.
But the independent economists and social scientists believe that textile is the most pampered sector in Pakistan that was given cotton at 50 per cent of the world prices for more than 50 years, unlimited amount of loans on concession rates, including export refinance, and exemption from levies. With all these facilities and concessions, the textile sector was the biggest defaulter of bank loans in the decade of nineties and the total direct tax being received on the income of textile tycoons was hardly Rs300 million.
“How much research has been done from 6 per cent R&D facility given to the hosiery and readymade garment exporters,” Abdul Razzak, a supervisor in a local readymade garment company asked. Garment exporters concede that the 6 per cent R&D facility was a concession that kept the garment and hosiery companies afloat in 2005-06.
“A textile worker is the least paid employee in industry,” Karamat Ali of Pakistan Industrial Labour Education and Research (PILER) said in response to a query. He said that the much trumpeted $5 billion investment in textile had not generated as many jobs. In Bangladesh, the workers burnt down recently 16 factories to protest against the low wages. In India too, there is a strong trade union resistance against low wages and bad working conditions.
The textile industry in connivance of the government has cleverly amended labour laws in the Finance Bill to increase the working hours.
The leaders of all sectors of textile industry have already expressed their resentment on what they allege government’s indifference towards their problems. In a meeting on June 16, leaders of various textile sectors have feared loan default and without saying it directly has implied closure of their units.
