The spinners signed their death warrant finally on Tuesday by endorsing the Cabinet Committee on Textile decision of imposing quota on yarn exports in pursuance of the ill-conceived and irrational demand of the apparel sector and the home textile.
Sources from among the All Pakistan Textile Mills Association (APTMA) told Business Recorder that the textile ministry finally implemented anti-free-market-mechanism decision of imposing quota on yarn exports, thereby allowing the spinners to export only 50,000 tons (22 percent) of yarn monthly against total production of 240,000 tons, thus leaving some 190,000 tons of yarn (78 percent) for the consumption of local apparel sector and home textile.
Interestingly, the textile ministry has taken a decision in a situation where the spinning industry is denied power and gas altogether against its earlier decision of ensuring five days a week supply to the industry. Sources from among the APTMA leadership feared immediate closure of 50 spinning mills out of the present decision of the federal government. It might be noted that the spinning industry had already witnessed unprecedented closure of 80 mills in the wake of worst-ever load shedding since November 2007 coupled with 16 percent bank mark up.
The present increase in yarn prices in the international market had strengthened the spinning industry to some extent and the banks' recoveries were improved accordingly. However, the apparel sector, and the home textile made hue and cry, leading to an unpopular decision of imposing quota, a negation of WTO rules, on the part of federal government. The government, said the industry sources, took the decision on political reasons, as the power looms owners had threatened to start violent protests in case the government failed to surrender to their irrational demand.
The apparel sector and the home textile industry had pleaded that the spinners were earning a dollar for each kilogram by exporting yarn against their potential of earning $6 a kg by adding value to the yarn. However, the data tells a different story, as the home textile, knitwear garments and the woven garments had registered a negative growth of 22 percent from June 2005 to June 2009. The government had no option but to provide heavy subsidy of Rs 40 billion, besides 5 percent export refinance and Long Term Finance each to these sectors.
Now when the government has imposed quota on exports of yarn, a growth in the exports of apparel sector and home textile should not be less than 7 percent a month, which seems a far-fetched idea keeping in mind the overall performance of these sectors during last five years.
The textile experts have, therefore, feared that the government would not only disturb the growth of spinning industry by imposing quota, but also make the apparel sector and the home textile further inefficient by surrendering to their irrational demand.