LAHORE, Jan 13: The relief package proposed by the National Textile Strategy Committee (NTSC) for pulling the textile industry out of current crisis and make its exports competitive in the world market is expected to cost the government Rs80-100 billion, federal textile ministry officials say.
“The NTSC has proposed to the government to provide relief package to bring down the cost of value added textile exports by about 11-12 per cent and of yarn by 3.5-4.5 per cent,” senior officials who have seen the committee’s report told this reporter on Saturday.
The relief demanded by the committee also includes 3-6 per cent R&D support already extended to the garments (six per cent), home textiles (five per cent), and grey cloth (three per cent) exporters.
The committee has proposed to the government to suspend all provincial and federal levies like social security fund, EOBI, education cess, etc till the time the industry comes out of the crisis and becomes competitive enough to compete with its regional competitors like India and Bangladesh.
The committee further suggested that this benefit should also be passed on to the spinners. The suspension of the levies will provide financial relief to the manufacturers and exporters across the textile chain of about 1.5-2 per cent of their total cost of exports.
Another concession made in the report calls for suspension of turnover tax (one per cent on value-added and 1.5 per cent on yarn).
Besides, the NTSC has recommended to the government to considerably reduce the price of gas used by the industry for power generation in order to help the textile industry save up to one per cent of the total cost of production.
The committee has suggested that a WTO Compliance Initiative be also instituted in order to extend relief of up to three per cent to the exporters of value-added products on their total cost of exports. “Under the proposed initiative, each exporter stands to get benefit to the scale of (social, environment, etc) compliance achieved by him,” the officials said.
They say if the NTSC relief package is implemented in toto it will bring down the cost of production of value-added sector by up to 11-12 per cent and of spinners by 3.5-4.5 per cent and help them compete with the regional textile exporters who have so far been able to undersell their value-added exports in the international markets by around 10 per cent or more.
The NTSC was constituted by Prime Minister Shaukat Aziz on the demand of the textile industry after its exports dipped by around 10 per cent during the first four months of the current fiscal year.
The officials say the NTSC report, prepared by leading businessman and former Aptma chairman Tariq Saigol, was presented to the prime minister in the first week of last month in Islamabad. However, the officials said, he had not made any commitment to implement the recommendations made in the NTSC report.
“After listening to the proposals and recommendations, the prime minister had told the representatives of the textile industry present at the meeting that he would wait to see the export figures for the months of November and December as well in order to assess as to whether the decline in textile exports during July-October reflected a trend or was only an aberration,” the officials said.
They said that the prime minister had also told the industry representatives that if the decline continued during the last two months of the Q107, he would constitute a working group of ministers of textile, finance, and commerce in order to study the report, assess its financial implications and give its recommendations for implementation.
When contacted, Textile Minister Mushtaq Cheema told Dawn by telephone from Germany, where he has gone to attend Heimtextil fair, the industry was indeed passing through a tough time. Nevertheless, he says, it was not possible for the government to give everything the industry is demanding.
“We have already given them R&D support to the tune of Rs30 billion (from July 2006 to June 2009) to enable them survive in a tough environment. Now whatever we shall give them, it will be for increasing their market share in the growing international textile trade,” he said.
He described certain demands like suspension of federal and provincial levies and export turnover tax as a bit too much. “How can we suspend something like EOBI, Social Security Fund, etc that is charged for facilitating the labour?” he asked.
To a question about the cost of the package, he said the package demanded by the industry if accepted would cost the government upwards of Rs100 billion.