KARACHI, Aug 24: About a dozen top leaders of the All Pakistan Textile Mills Association (Aptma) will meet President Pervez Musharraf on Saturday to apprise him of their financial woes and complain of being contemptuously ignored by the government in the budget 2006-07 and textile relief package.

“The textile package is for selected few, hardly two dozen textile business groups that include the textile minister himself,” a top Aptma leader, who is a member of the team meeting President Musharraf on Saturday, told Dawn by telephone on Thursday.

The textile relief package was prepared by a large group of businessmen that included Aptma. The package sought Rs50 billion relief which was initially ignored by the government. But later a meeting of the Economic Coordination Committee of the cabinet announced a relief package for readymade garments, fabrics and home textile that would cost the government and the State Bank about Rs25 billion.

The meeting with President Musharraf is being held amidst reports of banks sounding problems in recovery of loans from textile mills and there is a lurking fear of a sharp fall in cotton production this season because of rains and floods.

The rise in interest rates of banks is the dominating issue for the super rich spinners who were the biggest beneficiary of the State Bank’s last loan relief package given in the 1990s. The textile tycoons are now looking for the same concessions. According to an Aptma leader, one of the main purposes of seeking the highest level intervention in textile affairs was to convert spinners’ bank loans into State Bank special export-oriented units’ loans that was offered at seven per cent interest rate.

Almost Rs300 billion loans were obtained by the textile industry in the last five years to upgrade production techniques and remain competitive in the international export market after the phase-out of the textile quota in January 2005. More than 50 per cent of Rs300 billion loans -- Rs150 billion plus -— is said to have been obtained by the spinners when interest rates were four and five per cent.

A drop in interest rates proved to be a rich bonanza for all the traditional borrowers mainly from the textile business who were joined by cement barons, automobile tycoons and constructors and developers. More than a trillion rupees were advanced by the banks in the last three years, the SBP annual report disclosed.

Now that the State Bank has been forced to give up an “expansionary monetary policy” after exposing the 160 million people to backbreaking and unprecedented inflationary pressures and wants to discipline the bank credit, the only option was to raise the interest rates. This has made the investment expensive and is hurting industry, mainly the textile sector that for the last six decades has lived on rebates, subsidies, loans write-offs and concessions.

“I paid Rs70 million interest on my loans in 2004-05 and was forced to pay Rs130 million in 2005-06,” a top Aptma leader said. He foresees a sharp drop in cotton production because of rains and floods. “We may have to import a huge quantity of cotton,” he said.

As farmers get ready for the first pick of cotton next month, there is no word from the government and cotton related agencies on size of the crop that is keeping the entire chain of the textile industry guessing.

At present cotton is being offered in Punjab at Rs2,600 and in Sindh at Rs2,550 per maund. But in Sindh, a bale of cotton is said to be containing 15 per cent moisture.

While Aptma being a club of the richest people in Pakistan is showing all signs of discomfort and nervousness on the emerging business scenario and has complaints against the government, the value-added sector too is far from happy.

The Research and Support Development Order 2006 issued by the government this month did not offer three to five per cent rebate without any condition to the exporters of fabrics and garments. The five per cent rebate is being offered to dyed and printed home textiles. A three per cent rebate is being offered to dyed and printed fabrics and three per cent to home textiles that include fabrics, bedlinen, made-ups and towels with an explicit condition that only “the manufacturing-cum-exporting units with in-house dyeing and printing facility” will be entitled to this rebate.

This official notification has thrown out a whole lot of commercial exporters from enjoying the benefit of rebate. Many commercial exporters are manufacturers of textile products but were exporting products by buying from others.

The government notification has also a “positive list” of countries that are the USA, the EU, Australia, Indonesia, China, South America, Mexico, South Africa and Central Asian republics. The export of fabrics and home textiles to these countries will be given rebates while the export of fabrics to Turkey, Bangladesh, India and other countries will not be given any rebate.

Officials explain that exporting Pakistan’s fabrics to Turkey or Bangladesh has helped “our competitors in bed-sheets and garments” and hence the idea of denying rebate to export in these countries is to discourage exporters.

Dyeing and processing and ginning are the weakest links in Pakistan’s chain of textile industry. There is a lot of investment in spinning, then weaving and in value-added sectors but very little in dyeing and processing and ginning.

There are about 1,400 ginning and 635 dyeing and processing units. Hardly 100 to 120 ginning and 135 dyeing and processing units are of some quality and standard. Obviously those textile exporters who have built-in facilities of processing and dyeing are entitled for rebate facility and that is the reason that Aptma leaders and other are complaining that the textile relief package favours “selected few”.

Taking notice of the hue and cry of textile business, the prime minister has constituted a task force led by Textile Minister Mushtaq Cheema, which is monitoring the implementation of textile relief package. Export Promotion Bureau Chairman Tariq Ikram is also working a cost of doing business exercise of textiles.

But Bangladesh and Sri Lanka have offered rebates and subsidies to their textile exporters that made Pakistan’s relief package redundant and there is now a demand for more relief and concession.