The Ministry of Textile Industry has refused to pay the two percent compensatory rebate to the spinners on local sale in lieu of the quota restriction on the export of cotton yarn, as committed by the then Finance Minister at the time of imposition of quota restriction on cotton yarn export.
Sources in Ministry of Textile told Business Recorder on Thursday that as the commerce ministry had imposed quota of some 50,000 tons per month on the export of cotton yarn on the demand of value-added textile sector, the then finance minister Shuakat Tarin had assured the spinning sector of some incentives for sale of the commodity to the local textile industry.
Shuakat Tarin, in a meeting with spinners at Governor''s House, Lahore, in first week of February 2010, committed to All Pakistan Textile Mills Association that two percent compensatory support would be given to the spinners on their domestic sale of the commodity, adding that his ministry has already reserved some Rs 5 billion for the purpose. Tarin had asked APTMA to draft a mechanism for the payment of two percent compensatory rebate to the spinning sector.
At that time Textile Minister Rana Farooq, reportedly the chief supporter of value-added textile sector, opposed the idea of compensation to the spinning sector, the sources said. Now, when Shuakat Tarin is no more holding the finance ministry, the ministry of textile industry has flatly refused to pay the two percent compensatory rebate to spinning sector.
The ministry officials have informed the representatives of spinning sector that there is no such approval and allocation for the compensation. Acting chairman APTMA Shahzad Ahmed also confirmed that they are not getting any incentive against the quota restriction imposed by the ministry of commerce in favour of textile sector.
"Finance Minister committed with us for payment of compensation and confirmed that a huge amount of Rs 5 billion has been allocated for the purpose, however later we have been informed by Secretary Ministry of Textile that the government has not agreed to the proposal to give two percent compensatory support to the spinning sector," Shahzad said.
According to the ministry of textile officials, the proposal to give compensation was not approved by the cabinet committee on textile, he added. He said the government has further restricted cotton yarn export by reducing quota from 50,000 tons to 35,000 tons per month instead of giving relief to the spinning sector, which is on the course of recovery after facing two years of crisis.
"APTMA had also develop a mechanism for payment of the compensation amount to the spinning industry and according to the criteria, the mills which are selling products to registered firms through banking channel and registered with sales tax department, will be eligible for the two percent rebate on domestic sales," Shahzad said.