ISLAMABAD, Oct 20: The government paid Rs8.12 billion as cash subsidy on export of readymade garments during June 2005 to September 2006 to make the product competitive with those of China, India and Bangladesh on world market.

A senior official told Dawn on Friday that the whole amount was used by the manufacturers for subsidising the price of their products which benefited the end consumers in the European Union member countries and United States.

The official said that the government had committed to provide about Rs12 billion cash subsidy to the manufacturers of garment products till the year 2007-08.

However, he said it was not clear that the cash subsidy was being claimed on actual exports as there was strong possibility of fake consignments for claiming the subsidy.

The official said that despite all these subsidies the export of textile products was constantly on decline with no valid reasons.

The textile ministry has constituted many committees to work out proposals for boosting textile exports, but so far these committees in their reports only made comparison of incentives offered in various countries and did not analyse the competitiveness or potential of the industry for enhancing production, he added.

An senior official in the textile ministry who requested anonymity told Dawn that the government would have to give Rs1.5 billion as subsidy in the first year under the loan swapping of Rs31 billion of the textile sector. The half amount of this subsidy would be borne by the government and remaining would be adjusted by the commercial banks.

The country’s export history, the official said, is replete with subsidies, such as bonus voucher scheme, refinance scheme, cash compensatory rebates, freight subsidy and research and development support, which did not help in enhancing exports as envisaged at the time of their sanctioning.

In addition to these subsidies, both covert and overt, duty exemptions and tax concessions were also rampant. Despite all these incentives, the exports would barely touch $17 billion this year, he added.

He said an analysis of these policies would in fact reveal that they were not helpful at all as originally thought. And at the same time, these incentives cast a pernicious impact on the growth of export.