LAHORE, June 6: The proposed relief package for the textile industry is expected to be finalised in the next two weeks in order to provide level-playing field to the country’s exporters of value-added textile products vis-à-vis their regional competitors.
“We have finalised our recommendations. We will request the prime minister to convene a meeting for taking a decision on those recommendations next week,” Federal Minister for Textile Industry Mushtaq Cheema told Dawn on Tuesday from Islamabad over phone.
The textile industry is hoping for a relief package of Rs30-35 billion in the form of lower gas rates, subsidy on interest payments of loans outstanding since January 2001, reduced cost of export refinance, introduction of travel relief support (TRS) on processed and valued added textile products, etc., as recommended by the Zubair Motiwala Committee last month.
State Minister for Finance Omar Ayub told the National Assembly in his budget speech on Monday that the government intended to announce a relief package for the textile industry to help reduce its cost of doing business.
Cheema said the government would do anything it could to facilitate the textile industry to enhance its competitiveness in the international market by helping reduce its cost of doing business. However, he said, he was not certain as to the cost of the package to the government. “The cost depends on what kind of facilitation the government decides to extend to the industry,” he said in response to a question.
Originally the Motiwala Committee had recommended to the government to take steps for cutting the cost of doing business by putting together a relief package involving financial implication of Rs50 billion for the entire sector.
However, the huge cost of proposed measures involved is said to have prevented the government from taking any immediate action on the industry’s proposals.
“We met Prime Minister Shaukat Aziz last week and made a few changes in the proposed package, reducing the financial implications for the government involved in it by 30-35 per cent. The prime minister had promised that the recommendations of the committee would be taken up after the budget and a relief package for reduction in the cost of doing business announced to steer the textile sector out of the current crisis,” Motiwala told Dawn on Tuesday from Karachi over phone.
He said the industry was expecting relief in at least four areas – substantial reduction in gas rates, subsidy on interest payable on loans outstanding since 2001, introduction of TRS and low refinance rate.
On the basis of the Motiwala Committee’s proposals and in the light of discussions with the prime minister’s adviser on finance Salman Shah, the federal ministry of textiles has already recommended to the government to introduce a separate price slab for the entire textile sector and reduce gas rates by 45 per cent. The financial cost of this measure was calculated to be Rs15 billion.
To reduce the cost credit, the ministry has recommended reimbursement of five percentage points of all outstanding long-term loans/finances disbursed on or after January 1, 2001, made under conventional or Islamic mode of financing. If the government agrees to this measure, it will cost it Rs6 billion.
The rate of refinance is recommended to be brought down to 50pc of the current SBP rate of 7.5pc. The financial implication for the government would be around Rs4.125bn for taking this measure.
The ministry has proposed to introduce five per cent TRS on processed fabric, garments, knitting, home textiles and made-ups for manufacturers-cum-exporters to offset the incessant travel by exporters owing to negative travel advisory instructions by the governments of importing countries. The cost for this measure is estimated at Rs12 billion.
Another recommendation proposes 10 per cent financial support for capital investment for value added textile industry (excluding spinning), including second-hand machines. The acceptance of the proposal will cost Rs1 billion.