Textile sector: Prime Minister not in favour of extra concessionary financing

Prime Minister, Syed Yousaf Raza Gilani, has not approved the provision of more concessionary financing to the textile sector in violation of the established market conditions, official sources told Business Recorder. Presiding over a special cabinet meeting to approve Textile policy 2009-14, on August 12, the Prime Minister said the textile sector should be made self-reliant and not dependent on continuous cash support from the government.
"There should not be any intervention in the established system as the industry already has access to concessionary financing. The rates should be adjusted by the State Bank of Pakistan (SBP) according to the market conditions," the sources quoted Gilani as directing the Ministry of Textile Industry. The cabinet was also informed that the Textiles Policy was prepared in consultation with all stakeholders - industrialists, exporters, agriculture experts, investors, SBP and other relevant public and private representatives to make it a result oriented policy.
The sources said the cabinet was also apprised of the mission statements which aimed at developing and implementing a Textiles Policy for the promotion of consistency, predictability and transparency in government actions and programmes. Creation of an enabling environment for realisation of the potential of textiles sector, and reviving the confidence in Pakistan as a reliable source of quality goods at competitive prices was one of the missions, they added.
According to the sources declining trend in the textiles sector was due to poor infrastructure, fragmented industry, outmoded technology and machinery, export constraints, unprepared transition to WTO regime, restrictive competition, poor skills pool, regulatory bottlenecks, and absence of a truly zero-rated regime.
It was also explained that textile sectors of China and India were improving by leaps and bounds because of a generous support by their present governments. Smuggling, overloading of utility costs, subsidies by competitors were the reasons due to which textiles sector in Pakistan had suffered a lot. Improvement in this sector could only be expected when varieties of levies, multiplicity of taxes, excise duties were done away with, the sources added.
The cabinet was informed that the main objective of the policy was to facilitate the textile sector to develop international and domestic demand-driven capabilities and development of state of the art infrastructure facilities. The government was determined to make concerted efforts to secure greater market access, both in the United States and the European Union to enable the sector to realise its potential.
Due support would be provided for branding, grading, labelling, and the government would also use the information and communication technology to promote this sector. It was also brought to the notice of the cabinet that the job of stitching was being done by children which was against international labour laws.
An effort was being made to develop a comprehensive plan to enlarge women's role in the textile sector. Sub-sector initiatives were explained to the cabinet in detail. It was informed that the government would facilitate consolidation and adoption of new technology in dying, finishing, testing and product development in carpet production.
Immediate measures ie priority in utility load management, relief in refinancing cost and existing long term loans, restructuring of the textile sector, refund of past R&D claims, technology upgradation fund, support for increase of employment of women as well as the disabled/ handicapped persons, magnetisation of Preferential Tariff Agreement (PTA), infrastructure and skills development, tax relief to foreign experts, cascading of tariffs and zero rating for textiles machinery were explained to the cabinet.
It was observed that the initiatives being announced should have been taken long ago. The Prime Minister, is his concluding remarks, observed that the textile sector was presently facing unusual challenges and deserved support of the government. He, however, suggested that long term sustainability of some of the proposals relating to the provision of cash subsidies might be worked out before implementation.
It was also suggested by the Prime Minister that this sector should be made self-reliant and not dependant on continuous cash support from the government. He desired that in view of the budgetary constraints and the overall resource pressures, the proposed provision of 'drawback' subsidy should be carefully implemented to ensure its proper utilisation.
The Prime Minister directed the Textile Ministry that major principles like cascading and rationalisation of tariffs, reducing the number of regulatory departments and introduction of new varieties, like BT and organic cotton should be taken up on priority basis. He appreciated the initiatives for women workers and directed that these should be undertaken immediately.
The cabinet also approved the proposal for the constitution of a Cabinet Committee comprising Minister for Textile Industry, Minister for Commerce, Minister for Finance, Minister for Food and Agriculture, Minister for Industries and Minister for Investment to monitor the implementation of the Textiles Policy and related matters, subject to the following:
(a) a long term sustainability of some of the proposals relating to provision of cash subsidies should be worked out before implementation;
(b) the sector should be made self-reliant and not dependent on continuous cash support from the government;
(c) the proposed provision of draw back subsidy should be carefully implemented to ensure its proper utilisation in view of budgetary constraints and the overall resource pressure;
(d) there should not be any intervention in the established system as the industry already has access to concessionary financing. The rates should be adjusted by the State Bank of Pakistan according to the market conditions; and;
(e) major principles like cascading and rationalisation of tariffs, reducing the number of regulatory departments and introduction of new varieties, like BT and organic cotton should be taken up on priority basis.