KARACHI, June 19: The national exchequer will have to foot a bill of Rs2 billion towards payment of 3.5 per cent research and development (R/D) support allowed to the polyester staple fibre (PSF) manufacturers in the budget 2007-08.

This is going to be the first instance that taxpayers’ money will be paid to manufacturing sector, which had been hitherto being used and allowed only for the benefit of the export trade.

“We fail to understand the wisdom and logic of the policy-makers behind doling out such a huge amount from the national kitty to the manufacturing sector,” asserted Iqbal Mangrani, a leading exporter of polyester products.

He said that government included PSF in Duty and Tax Remission for Exports (DTRE) scheme, which has deprived the exporters of polyester products of drawback on export. This made exports uncompetitive. On the other hand the government allowing R&D to local manufacturers of PSF has no justification.

PSF was in DTRE scheme in the budget 2004-05 as a result of which few manufacturers of polyester products imported PSF of around 1,500 to 2,000 tons per month. There had been rapid fluctuation of PSF prices in the world market but all the time local manufacturers kept their pressure on the government to remove it from the DTRE scheme.

As a result of strong lobbying and pressure tactics the local manufacturers of PSF in the budget 2006-07 managed to influence the decision makers to withdraw PSF from DTRE.

On strong resentment from the All Pakistan Textile Mills Association (Aptma) and other trade bodies representing exporters the government put PSF importers back under DTRE in the budget 2007-08 but not without a huge cost of Rs2 billion to the national exchequer in the form of R D given to local manufacturers of polyester.

Mr Mangrani said that it exposed the inefficiency of local PSF manufacturers that even after achieving economies of scale they were still dependant on subsidies.

Chairman Pakistan Cloth Merchants’ Association (PCMA) Ahmed Chinoy said that if the government was giving such a huge subsidy to the PSF industry, there are many other industries including textiles, which faced with severe crisis and are on the verge of collapse.

Cheap imports of all sorts of consumer goods including textiles and garments causing injury to local industry also need government’s attention and support but it seems that the PSF industry has prevailed upon the policy makers through their intense lobbying and managed to get R&D benefit, he added.

Former chairman Pakistan Readymade Garment Manufacturers and Exporters Association (Prgmea) Bilal Mulla said that if the government was keen to provide R&D so feely then why to confine it to five PSF units alone and instead it should be given to the entire chain starting from PC yarn and fabric manufacturers as this will tremendously help to boost exports of value added items and will also benefit the entire textile industry.

Alternatively, he said, instead of giving R&D to entire production of around 600,000 tons of local PSF units it should be given only on the quantities of PSF imported by spinners, which will be hardly 2,000 to 2,500 tons per month. He further said that instead of paying R&D to PSF producers it should be given against export of PSF for earning foreign exchange for the country.