Pak textile sector to get Rs 12 bn package approval from ECC

Multan: The Economic Co-ordination Committee (ECC) of the Cabinet is all set to take up approval of Rs 12 billion package for the textile sector meeting an outstanding demand of textile sector. Sector tycoons, who had demanded Rs 30 billion as R&D support, called it a meagre amount to rescue the dwindling sector.

Official circles termed it as 'social welfare package for rich' at a time when inflation-hit masses are bearing burden of power tariff raise by 30 percent, unprecedented surge in food prices in Ramazan and manifold increase in POL price.

With full backing of political heavyweights, both in treasury and opposition benches, the textile tycoons have again come out to inflict huge injury of Rs 12 billion on national exchequer in the name of research and development (R&D) support to bail out this sector, which is experiencing recession right now, it is learnt.

Against demand of Rs 30 billion subsidy for textile sector, which is witnessing declining trend in its overall exports share, the Finance Ministry has recommended Rs 12 billion R&D support to the ECC in its summary, which would be meant for a couple of sub-sectors only within textile, especially for garments, whereas the offered rates would be fixed by the authorities in consultation with the stakeholders.

Pakistan's total exports were $19.223 billion during the financial year 2007-08 with textile exports of $10.561 billion and non-textile exports of $8.662 billion. The textile sector exports were $10.788 billion during the fiscal year 2006-07 while non-textile exports stood at $6.189 billion.

'So the non textile sector witnessed 40 percent growth in FY 2007-08 compared to the previous year while textile sector registered negative 2.1 percent growth in 2007-08,' sources said quoting official data.

Total share of textile in exports declined from 63.5 percent in 2006-07 to 54.9 percent by 2007-08. During first month (July) of fiscal year 2008-09, non-textile exports jumped up to $999.5 million against $541 million in July 2007, registering a growth of 84.6 percent in first month of the ongoing fiscal year.

Textile exports in July 2008 stood at $905 million while it was $930 million in July 2007, witnessing a negative growth by 5.6 percent during the first month of the ongoing financial year. The share of textile exports further declined to 47.5 percent in July 2008 while the share of non-textile exports went up to 53 percent.

According to initial estimates prepared by the Federal Board of Revenue (FBR), Pakistan's exports grew by 40.5 percent in first two months (July and August) in rupee terms in the current fiscal year.

The PPP government has not allocated any budgetary provision for textile sector's research and development subsidy in the recently announced budget 2008-09 but now they are going to again subsidise the sector, which failed to perform well despite getting Rs 32 billion subsidy in the last financial year.

The textile sector is known for its attitude of having rent seeking under which major players got the major chunk of benefits without doing much for increasing their competitiveness and efficiency. The previous Shaukat Aziz regime made tall claims that the textile sector imported around $5 billion machinery in order to modernise their operations but now it was revealed that they brought mainly old machinery in the country from USA, which was not efficient in terms of power usage.