The Tariq Saeed committee had suggested 25 percent reduction in gas prices and freezing of electricity tariff till June 30,2009 to stave off the crisis in the textile industry for its survival. Tariq Saeed who headed a sub committee on the directions of the Prime Minister to formulate a textile strategy submitted his report in December 2006.
Sub-Committee of National Textile Strategy Committee (NTSC) was set up in September 2006. It may be recalled that an earlier report by Zubair Motiwala also made similar suggestions to protect the textile sector from the looming crisis, but the government was not fully convinced.
It may be added that the same suggestions have been given at various forums, as many industrialists complained they were not being given level playing field to remain competitive. They further pointed out that in the global textile sector, their competitors were given subsidies and other facilities, which have been denied, to the domestic industry, resulting in clear advantage to the regional competitors.
It is learnt that the Tariq subcommittee report comprised four sections specifying steps for immediate interventions for survival, immediate initiatives for increasing exports, immediate measures to trigger investment, and sectoral issues concerning the textile sector. Under the immediate interventions for the survival of the textile industry, the subcommittee recommended that central, provincial, local government taxes/levies/surcharges be held in abeyance till June 30, 2009, in addition to continuity of R&D support till then and expeditious payments.
The Ministry has okayed it, estimating its financial impact as Rs 20.674 billion. Apart from this, the committee recommended one-time swapping of the outstanding loans of spinning sector on December 1, 2006 under LTF scheme and proposed for 0.5 p.c. incentive to textile export manufacturers for each of ISO-9000, ISO-14001, OHSAS 18001, SA8000, WARP and CT-PAT up to a maximum of 2 p.c. as social compliance incentive.
The Ministry of Textile has considered only nine of the total 32 recommendations so far. The swapping of loans, it estimated, says would have a financial impact of Rs 0.5 billion and the social compliance incentive would cost another Rs 2 billion.
As the government seems to be quite rigid on the subsidies, it has not touched on gas and electricity prices. To expedite exports, Tariq recommended six points: duty free import of processed fabric, accessories, printing screen, dyes & chemicals for garment and home textile sectors, and duty drawbacks for Polyester Staple Fibre (PSF) and filament based products. He further asked for import of all chemicals and dyes including caustic soda to be in the basket of duty drawback. The suggestions for screens and caustic soda were supported by the Ministry which calculated its financial burden around Rs 0.631 billion. He also proposed 3 p.c. R&D on garment and home textile exports manufactured from locally produced fabric and accessories, which is not included in the nine priority items taken up by the Ministry of Textile.
The proposal of Tariq Saigol on PSF be included in Duty and Tax Remission for Tax (DTRE) scheme for complete zero rating has been recommended by the Ministry, which it states would account for Rs 1.9 billion financial impact.
However, his suggestion to refund textile industry pending sales tax by December 31, 2006 has expired and still CBR is not in a position to finalise the pending cases.
To trigger investment, he has emphasised on balancing the textile chain with improving weaving sector suggesting 10 p.c. capital grant and zero rating the 5 p.c. duty on import of plant/machinery/ and spares. However the ministry noted that weaving alone would cost an additional burden of Rs 4 billion. Saigol also suggested suspending customs duty on import of textile machinery and generators till June 30, 2009 for new investment and asked for zero rate customs duty on spares and accessories by allowing drawback at 5 p.c. of F.O.B value of exports. To trigger investment, he further proposed developing financial instruments for long-term lending and stressed on elimination of under invoicing and smuggling of imported garments.
Apart from measures to enhance textile exports, trigger investment and taking immediate measures for survival of the industry, he has pointed out to improve and remove weaknesses in the textile manufacturing chain suggesting improving cotton fumigation arrangements, introducing Bt cotton, clean cotton programme and to waive prior permission requirement for import of raw cotton, and suggested upgradation of ginning technology.
He proposed the knitting and woven garments/home textile units involved in 50 p.c. of exports should be declared Export Oriented Units. On the power looms, the report said that 1.25 p.c. turnover tax is too high as 0.5 p.c. margins are low. Withholding tax of Rs 2,000 per month on each electric meter be reviewed and asked to allow B-2 tariff for power loom sector. He also suggested reduction of withholding tax from 6 percent to 2 percent on the services of processing sector.
The ministry has considered setting up fumigation arrangements, introducing of Bt cotton technology and waiving of prior permission for cotton import by taking administrative measures, as these do not involve any financial cost. The Textile Ministry has estimated an overall financial impact of Rs 29.761 billion on the nine recommendations proposed in the report, to which it is in agreement.