ISLAMABAD, July 29: The textile tycoons succeeded in forcing the government to announce a hefty package of subsidies for exporters of textile and clothing. The package drawn on the taxpayers’ hard earned money is further likely to compound the economic woes of the country.

The package among others will be taken up for final approval in the special Economic Coordination Committee (ECC) meeting to be convened on Wednesday headed by Finance Minister Naveed Qamar, a senior official told Dawn on condition of anonymity.

As perceived from the previous government the ECC meeting has been headed by the prime minister but as Mr Gilani is on an official visit to the USA, he empowered Mr Qamar to head the meeting, the official added.

Interestingly, the decision came at a time when Textile Minister Ahmad Mukhtar, who also holds additional portfolio of commerce, is in US along with the prime minister and the minister of finance seems to be in a hurry to approve this hefty package of subsidy for the sector.

A source in the textile industry said that textile and clothing sectors had strong representation in the government and even one member of the advisory council is also from the textile sector.

“It is very easy for them to get these monetary benefits from any government including the present one. No body can dare to resist them,” the source said and added the proposed package is likely to be between Rs20 to Rs30 billion.

However, an official in the finance ministry confirmed that there was a cushion for the subsidy but he showed his ignorance about the actual number. He said that it would not be possible for the government to announce an all out support because this amount has not been shown in the budget, which would be an extra budgetary measure.

The government had already dolled out more than Rs43 billion as subsidy to the sector since April 2005 but the exports from the sector has been stagnated. The subsidy was mainly used to finance the purchasing power of the rich countries’ consumers at Pakistan’s taxpayers’ money.

The statistics showed that despite this support the export of textile and clothing sector has declined during the year 2007-08 over the previous year. The government should conduct audit of the recipients of the R&D subsidies to identify its impact on increasing exports or re-investment before making further export commitment, added the source.

An official in the Federal Board of Revenue (FBR) said that the tax department had already communicated to the finance ministry that the sector was not contributing to the tax collection as the only tax coming from the sector was the one per cent flat rate of withholding tax on export proceeds.

The whole sector has been made zero rated from payment of sales tax and also enjoys exemption on import of raw materials and machinery besides long-term financing facilities available to the sector.

Before taking up the issue in the ECC, an official announcement of the finance ministry said that it had been in principle agreed that the government will continue to provide Research and Development (R & D), which expired on June 30, 2008.

Finance Minister Naveed