ISLAMABAD, Oct 19: More than Rs23 billion government subsidies in over two years to the textile sector have failed to add a single textile mills during the period, and instead there are clear indications that a large amount has been diverted by the beneficiaries in the setting up of industries in other sectors.

Sources in the textile industry told Dawn on Friday that most of subsidies have been diverted to other profitable industries, like cement, sugar and power generation, during the period under review.Statistics showed the government has dolled out more than Rs23.5 billion under the head of so-called six per cent research and development subsidies to the industry since April 2005 to August 2007.

The amount of subsidies will reach around Rs50 billion by June 2008 which is the last date for availing the facility.

Many more billions are offered in re-scheduling of loans and under the export refinance scheme to the textile sector during the period under review.

“Yes, I confirm it that no single industry in the textile sector has been set up during the last three years,” said Textile Minister Mushtaq Ali Cheema while talking to this scribe on Friday.

The minister agreed with a questioner that it is true that some industrialists might have imported machinery for upgrading its quality or production capacity but no new mills has been set up in the country during the last three years.

He said this is very unfortunate for the survival of any industry like textile sector, where flow of money is squeezing during the last three years.

He added that share of banking in short and long term loans in the textile sector also witnessed a steady decline during the last three years.

Mr Cheema also did not rule out possibility of diversion of money from textile sector to other profitable sectors.

Asked about the impact of subsidies on establishing new mills, the minister replied that his ministry had no record to determine the impact. However, he said subsidies were meant to support the sector for increasing its competitiveness.

The sources said many textile tycoons have invested in the power generation, and some other sectors as there was no linkage of the subsidies with expansion in production or quality etc.

The sources said though Pakistan is the fifth largest cotton producing country, only five per cent of cotton has been made available to the value-added sector, which ensures maximum employment, besides huge remittances.

The remaining 90 per cent of cotton goes to raw product or semi products, which are exported in bulk, which in return attract very lesser remittances and low employment.

The sources said government also allowed subsidy on fabrics etc, which are exported to Bangladesh. These subsidised fabrics were converted into garments by Bangladesh. This means that Bangladeshi exporters were making profits at the cost of Pakistani taxpayers money.

The minister said that changing of duty drawback regime also made the textile manufacturers less competitive.

He said that the market access is also a big issue as other countries, like Bangladesh, Sri Lanka and India, were enjoying preferential market access for their products as compared to Pakistan.