Mark-up with Rs 50 million per annum cap: government to facilitate investment in textile sector

The federal government will pick up 50 percent of the mark-up subject to a maximum of 5 percent per annum whichever is less with a cap of Rs 50 million per annum with the objective of attracting investment in the textile sector, a notification issued by the Ministry of Textile late Tuesday said.
The government would also provide grant up to 5 percent of the equity for new plant and machinery with a cap of Rs 50 million and 20 percent of the capital cost for new plant and machinery not exceeding Rs 10 million only as investment support to Small and Medium Enterprises (SMEs) as defined under the State Bank of Pakistan Prudential Regulations for SMEs.
The government had announced a technology up-gradation fund scheme in Textile Policy (2009-14); and later issued Technology Up-gradation Support Order 2010 (April) providing incentives to textile machinery and technology. For projects with equity investment in machinery and technology, the government may provide grant up to 5 percent of the equity (based on LC document) for new plant and machinery with a cap of Rs 50 million.
For projects with investment (loan or equity based) in machinery and technology not exceeding Rs 10 million, the federal government may provide grant up to 20 percent of the capital cost for new plant and machinery only as investment support to Small and Medium Enterprises (SMEs) as defined under the State Bank of Pakistan Prudential Regulations for SMEs.
The mark-up support and investment support will cover only the technology and machinery identified in the "TUF documents", as per eligibility criteria determined by a technical committee chaired by the Secretary to be constituted and notified by the Ministry of Textile Industry. If any question of interpretation or clarification is raised as to the machinery under the scheme, the decision of the technical committee will be final.
The notification further adds that the federal government will periodically review and revise the list in consultation with the industry. Mark-up support and investment support will be paid by the commercial banks after fulfilment of eligibility criteria notified in the "TUF documents" by the unit on six-month basis in March and September each year subject to release of funds by the government for relevant fiscal year.
The scheme takes effect from September 01, 2009 and will remain valid up to June 30, 2014. Disbursements under this notification will continue for the duration of loans till June 30, 2024. The repayment period shall not exceed ten years including grace period as may be allowed by the SBP.
The Textile Policy states that the units availing the technology up-gradation scheme would be required to establish that their investments will have at least one of the following characteristics: (i) improve overall technological configuration of the sector; (ii) remove critical imbalances in the value chain; or (iii) achieve compliance with international standards.
The machinery that may benefit from the 50 percent mark-up scheme with a cap of Rs 50 million may be used for processing/production of fibre, filament, yarn, fabric, or any other article made wholly or in part with the fibre along with the machinery to improve efficiency, productivity, information communication technology, energy and environmental compliance in identified machinery/technologies as defined by the Technical Committee. Machinery used for the manufacturing of machines used for the production of textile chemicals and accessories will be included in later stages. Domestic machinery manufacturers, textiles dyes and chemicals and accessories units would also be required to be registered with the Ministry of Textile Industry to take advantage of this scheme. The Technical Committee will decide their inclusion and procedures, including eligibility criteria.
Mark-up support and investment support will be provided to existing and new textiles units registered with Ministry of Textile Industry. The unit availing the support will be a registered sole proprietor, partnership or a company and will be a member of a textiles associations or Chamber of Commerce and Industries registered with the Directorate of Trade Organisations, Ministry of Commerce.