KARACHI, July 8: Prime Minister Shaukat Aziz did not accede to the pressure of the textile industry seeking relief package of Rs50 billion. Presiding over the Export Promotion Board (EPB) meeting on Saturday in Islamabad, he politely brushed aside the demand raised by some of the textile leaders and said: “The EPB is for policy and not to give subsidy,” sources privy to the meeting told Dawn.

While fully endorsing the views of State Bank Governor Dr Shamshad Akhtar with regard to the quantum of relief being sought by the textile industry, the prime minister assured the meeting that the SBP governor would be convening a meeting next week to see if some reduction was possible in the interest rates, sources said.

During the course of the meeting, Textile Industry Minister Mushtaq Ali Cheema, who is under tremendous pressure from the industry, is reported to have told the prime minister that under these circumstances he would not be able to continue and may have to resign.

However, the prime minister hastily told the participants that the State Bank governor would be calling a meeting with textile industry leaders next week to look into their demand of reducing interest rates.

There have been three major demands from the textile industry -- cut in interest rates, subsidy on gas tariffs and devaluation of the rupee. However, during recent meetings it was brought to the light that interest rates were slightly higher than those prevalent in the neighbouring countries.

Consequently, it is being strongly felt that the State Bank governor may allow a cut up to one per cent in export refinance rates, which will enable them to be at par with rates presently prevailing in India. However, some analysts strongly feel that the government has little fiscal space to absorb such a huge relief package of Rs50 billion, particularly when it has to confront the huge POL import bill.

Sources said the EPB meeting had totally dampened the spirit of the textile industry, which had been pinning great hopes on the ability and the hard efforts being put in by the textile industry minister in seeking some relief for the industry.

“A nice way was adopted by the prime minister for closing down the chapter once for all,” a participant observed. He said that Mr Cheema had been putting in very hard work, realising the problem being confronted by the textile industry and calling meetings almost every week to get some solution and relief for the industry.

However, the textile minister has now come under tremendous pressure from his own people to quit the post as no solution was coming forth and industry have lost all hopes with regard to the relief package being announced.

Meanwhile, the industry has been arguing that they have heavily invested in expansion and modernisation of their units, but are now confronted with high cost resulting out of high interest rates, and high power and gas rates.

They argued that about a year back export refinance rates were at around three per cent but have gone up to 9 per cent. Similarly, general interest rates have surged from six per cent to 12 or 13 per cent. As to how the industry could stay viable when it was being hurt on several counts.

According to industry estimates, presently Pakistani textile products are costlier in the world market by up to 28 to 30 per cent. Around 16 per cent is on account of reduction in per unit price and about 15 per cent on account of higher input cost. The industry also claims that the government officials privately accept that the textile industry is in real crisis but are not ready to come up with any solution relating to relief package.

Similarly, the industry is also well aware of the problems being confronted by the government with regard to huge POL import bill owing to rapid increase in crude oil prices in the world market and its impact on the economy as a whole. Analysts feel that both the sides presently having a choice between devil and a deep blue sea.