KARACHI, Aug 29: Textile tycoons are showing signs of nervousness after having been unable to compete well internationally over the last 15 months following expiry of textile quota regime.

There are indications of a split in their ranks on the issue of who should share how much subsidy benefits.

As stake is almost Rs1.5 trillion annual business turnover that include about Rs600 billion export mainly in the USA and EU markets which is now under threat from far more aggressive and shrewd textile exporters of China, India, Bangladesh and other countries.

Pakistan textile exporters attribute their competitors’ advantage to the “loads of incentive and subsidy packages” given by their governments from January 2005 when textile export quotas were dismantled. Subsidies and soft loan incentives are being offered to the textile business in Pakistan too.

But according to one of the leaders of All Pakistan Textile Mills Association (Aptma) “it is for selected and chosen business leaders who are being pampered at the cost of others in the textile business and also at the expense of other industrial sectors”.

As the season of cotton picking draws closer, and relatively small textile mill owners fail to reach an amicable arrangement with their banks for cotton financing, the bitterness is becoming more intense and pronounced.

Now the names are being named as to who was what before late military dictator General Zia-ul-Haq took over in July 1977 and how these business groups enjoyed crony status all along.

The banks are offering cotton financing at 13 and 14 per cent generally to the textile mills but there are “groups that get loans on a single digit interest,” to quote a mill owner.

One of the many indications of a split in the ranks of spinners was more than visible in recent meeting of Aptma leaders with the prime minister last Saturday.

An enquiry made with about half a dozen leaders of Aptma on Tuesday to know the outcome of the meeting with Shaukat Aziz revealed that a few top owners of textile mills did not join the delegation despite being a part of the team.

“The big ones have already been promised milk and honey by the government and hence it would have been a waste of time for them to be in the meeting on Saturday,” an Aptma leader in Lahore told Dawn by telephone.

He also pointed out that the notification issued by the government on granting of subsidy benefits explicitly kept out commercial exporters and relatively small mill owners from the net of concession package.

A few small textile mill owners were of the view that the big groups feared that spread of subsidy and soft loans benefit would reduce their share and hence many of these big leaders preferred to stay away from the meeting and remain non-committal in raising fresh demands.

The Aptma leaders are said to have pleaded the prime minister for conversion of their loans obtained in 2001 to 2003 at about 5 and 6 per cent into soft loans being given under long-term financing arrangement for export-oriented units and credit for locally made machinery (LMM).

In support of their demand, Aptma is reported to have pointed out that India is offering loans at 5pc under a special lending programme for improvement and upgrade of textile production techniques in which spinning sector is being given 38pc share.

Besides an in-house dispute in the textile sector, leaders of other industrial sectors look towards the mighty big textile groups grudgingly because of their special crony status with the government. The most bitter among these sectors is the engineering sector.

One of the leaders of the engineering sector who has been a former elected office-bearer of the FPCCI recalled that in 2004 about 180 textile mills in a survey had disclosed an average loss of 2.5pc every year in their business.

In 2004, former State Bank governor Dr Ishrat Husain had commissioned Associated Productivity Consultant to study the competitiveness status of textile industry just before phasing out of textile export quotas.

In the survey, the respondent mills informed that cotton in spinning and yarn in weaving constituted about 58 to 59pc of their production cost. Financial cost was six per cent, utilities 17pc, workers’ wages 17pc and administrative cost was only two per cent.

The survey focused on yarn, woven fabrics including denim, knitwear garments, towels, home textiles. The cost of conversion of various items were calculated after considering the standard heads of variables and fixed cost of power, labour, wages, administration, insurance, depreciation and financial cost.

According to the survey, the banks offered from 1999 to March 2003 total loans of Rs103 billion while textile owners invested Rs39 billion from their own. Another survey showed that out of $4bn invested in textile industry during 2000-2004, about 47pc went into spinning, 26.3pc in weaving, 10.5pc to textile processing, 4.8pc to knitwear, 7.7pc in made-ups and 5.2pc in synthetic textiles.

During 2004-05 a sum of Rs53bn was invested while Rs60bn was said to have been invested in 2005-06. Bulk of these loans for investment were booked at relatively low interest rate which has now gone up and haunting the textile mill owners.

“A 17,000 spindles mill is now paying Rs100 million markup on loans as against Rs60 million in 2004-05,” a former chairman of Aptma said.