The State Bank of Pakistan on Wednesday announced to extend the 3 percent mark-up subsidy for the spinning sector by one year to facilitate the textile sector. The textile sector is facing worst financial crisis due to the high mark-up on the back of tight monetary policy and was demanding cut in the interest rate.
Therefore, effective July 1, 2007 the government announced a mark-up rate subsidy of 3 percent to spinning mills on their outstanding running balances of principal amount of floating rate loans availed by the industry from commercial banks and DFIs for financing import of spinning machinery on September 6, 2007. As per the previous order the subsidy was for the one-year and no subsidy claims will be entertained after 31st January 2008 and 31st July 2008 for six monthly periods.
However, on Wednesday SBP made amendments in the Mark-up Rate Subsidy Scheme for the Spinning Sector with immediate effect, under which the period of mark up rate subsidy has been enhanced from one year to two years from July 1, 2007 to June 30, 2009. SBP said that an amendment has made on the advise of the finance division, as it has announced some modifications in the mark-up rate subsidy of 3 percent to spinning mills vide their Notification No F.1 (1) BKG(R&S)/2007 dated 20th February, 2009.
This is the second relief package for the textile industry by the government as earlier on January 22, 2009 SBP had given a one year moratorium on loans availed under the Long Term Financing Facility (LTFF) scheme. Under the moratorium around Rs 11.8 billion due in the year will be pushed back by 12 months.
SBP ISSUED FOLLOWING CIRCULAR: Please refer to MFD Circular No 6 dated October 30, 2007 and Government of Pakistan's SRO No 973(I)/2007 dated 6th September, 2007 on the captioned subject. It is advised that Finance Division, Government of Pakistan has announced some modifications in mark up rate subsidy of 3% to spinning mills vide their Notification No F.1(1)BKG(R&S)/2007 dated 20th February, 2009.
2. In pursuance of the government's above notification, the following amendments have been made in the Mark-up Rate Subsidy Scheme for the Spinning Sector with immediate effect.
i. The period of mark up rate subsidy has been enhanced from one year to two years from 1st July 2007 to 30th June 2009.
ii. The subsidy for the period from January 01, 2008 to December 31, 2008 shall be paid in March 2009. Subsidy for six months period ending on June 30, 2009 (from 01-01-2009 to 30-06-2009) shall be paid in July 2009 subject to necessary budgetary allocations for the FY 2009-10.
iii. Those spinning mills that could not avail subsidy for the first six months ended on December 31, 2007 due to their inability to seek settlement of their overdue loan instalments or for any other reason may also file claims separately to their banks for availing 3% mark up subsidy of the said period in March 2009, provided their default has since been settled
3. Banks / DFIs can pay the amount of subsidy to the eligible borrowers of spinning sector, to be calculated keeping in view the guidelines given in MFD Circular No 06 dated October 30, 2007 as well as the above modifications. After making payments of 3% mark up rate subsidy, banks / DFIs can approach the concerned offices of SBP-BSC (Bank) for reimbursement of the same, along with duly filled in application form on the Revised Format.
Banks/DFIs must ensure that all eligible cases are submitted to the respective offices of SBP-BSC (Bank) during the period prescribed for payment of subsidy. No subsidy claim shall be entertained after 31st March 2009 and 31st July 2009 for the respective periods of subsidy.
4. Other instructions on the subject shall remain unchanged.