The textile industry recently came to a virtual halt with a strike against the 31% increase in the gas price and 68% increase for the captive power plants which are widely used by the textile industry to offset the shortage of the publicly supplied electricity.  This shift to the captive power plants run on gas was merely based on the fact that the industry needs to run uninterrupted to meet their production schedules and commitments to their customers. 

The present increase in the price of gas is seen by industry as unjustified.  The protest started in Faisalabad, spreading to all major textile centers  of the country. 

 According to G.R. Arshad, former chairman, All Pakistan Textile Processing Mills Association (APTPMA), and a prominent industrialist,  “the captive power plants were installed by the private entrepreneurs after investing huge amounts in order to meet the acute shortage of electricity for value added textile units engaged in dyeing, bleaching, printing and processing, knitting, hosiery and towel manufacturing, etc for whom natural gas has assumed the status of a basic raw material. Even the slightest increase in the prices of gas during the ongoing post-WTO scenario would render our products uncompetitive and oust us from the international export market.”

The  Government of Pakistan should withdraw the increase in gas prices.  Gas is an indigenous resource which should be readily made available to our industry at low cost to remain competitive. Without any doubt, a healthy and flourishing  textile industry is imperative to the prosperity of Pakistan.

R&D subsidy is vital for the value added sectors

The Economic Co-ordination Committee (ECC) of the Cabinet did not approve the much-talked about textile package despite 'substantial' efforts by the Minister for Defence Ahmad Mukhtar, and deferred efforts to the next inter-ministerial committee meeting. Textile manufacturers-cum-exporters were the most disappointed sector after the announcement of the Federal Budget 2008-09. There was no mention of the R&D  support in the budget speech.

R&D programme was initiated for providing a boost to the textile exports, which have been hit seriously after the abolishment of quota regime in European Union in 2005. The previous Textile Minister, Mushtaq Cheema however, had announced 3% to 6% R&D support for different textile sectors.

In the first phase, R&D support was announced only for fabrics in May 2005, however later in August 2006 some other textile products were also included in the programme. Presently, the government is paying 3% R&D support on fabrics, 5% on bed wear and knitwear and 6% on textile garments.

Inspite of availing subsidy equal to $320 million in the last two years, the textile sector has failed to increase the textile export to the same level.  In fact the textile exports have witnessed a decline of $246 million in July-May period of outgoing Fiscal Year 2007-08 as compared to the same period in the previous fiscal year. The authorities concerned feel that R&D support should not be allowed, as this is making local textile industry more un-competitive and it is relying on subsidies rather than competition.

This textile subsidy is to be provided out of the budget estimates for the 2008-09 and it would be an additional burden on national exchequer. The present government, which has been criticizing the previous government for allowing out of the budget R&D support to the textile sector, may have to repeat the same practice in the next fiscal year.

The authorities are of the view that R&D support was actually meant for product development and research for improvement in designs and export competition. According to the reports the R&D support is being misused to a large extent and authorities concerned have already decided to conduct audit of the textile units availing such subsidy.

At this point of time when the country is under pressure due to projected heavy budget deficit of Rs 737 billion in the outgoing Fiscal Year 2007-08, allocation of a huge amount as textile subsidy is being viewed as political decision rather than an economic one.

Pakistan Hosiery Manufacturers Association Southern Zone Chairman Jawed Bilwani said R&D is not a subsidy, but a support which cannot be phased out as was being suggested in the bill.

The Chairman of All Pakistan Textile Mills Association (APTMA), Iqbal Ibrahim, said that the government's move will erect more hurdles for industries, particularly for the textile sector. He said that the country's textile industry has capability to enhance textile export up to $20 billion during next five years if the government provides cheap land, smooth supply of electricity and gas on rationalised rates.