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Thursday June 13, 2024

Crisis in textile industry: Facts and fiction (II)

In the first article appeared on July 9 of this two-part series on textile crisis, adverse impact of the energy crisis on textile industry and the official indifference towards burning issues came under discussion. These factors, it was argued, has resulted in significant gradual decline in export of the textiles

By Shafqat Mehmud
July 12, 2015
In the first article appeared on July 9 of this two-part series on textile crisis, adverse impact of the energy crisis on textile industry and the official indifference towards burning issues came under discussion. These factors, it was argued, has resulted in significant gradual decline in export of the textiles and closure of manufacturing units. We also drew a comparison of the incentives being offered to textile industry in China and India and how far the situation has adversely placed Pakistan as against regional competitors.
Discussion was not only focused the industry but also the uncertain future of huge work force employed by the textile sector facing existential crisis. It was also explained the crisis is not confined to the spinning sector. Instead, it can impact others sectors such as cotton growers as well as value-added industry.
If the first article was a problem statement, this piece will suggest remedial steps required in order to arrest the crisis. Let me begin with the official stance that is explained in June the government’s Letter of Intent with the IMF of June 15 this year. In it, the government took credit of withdrawing the subsidy on power. It has been a consistent policy of the government to withdraw any concession and nail down employments available to poor people pushing them further below the abject poverty line.
It is amazing to note that the Gas Infrastructure Development Cess (GIDC) has been termed as a ”revenue enhancing measure” in the said letter. One would think that Cess could have been utilized in maximizing the supply of gas to industry and domestic consumers. The government has passed a law to recover GIDC to the tune of billions of rupees retrospectively alone from the textile industry. “For making amends for its in-efficiency, government is taking strange revenue measures,” said Tahir Basharat Cheema, former chairman of Pepco. The owners of leading textile concerns who termed it “invisible taxation” by government for boasting its revenue growth also shared this opinion. If a sound industrial unit finds it difficult to survive, they wondered, the plight of other financially sick units can very well be imagined.
The Multan Chamber of Commerce and Industries has warned that cotton growers will also be the worse sufferers if the spinning industry is hit badly. Regarding factual position, the body of small cotton growers was found totally at loss facing lesser demand of cotton as they survive from season to season after escalating cost of in-puts material. They wondered that textile tycoons may find some other avenues but growers can’t do anything else. “How people saddled in comforts in the ministries can understand the woes of the farmers whose miseries will multiply in case the spinning industry is closed”, lamented the body of small cotton growers.
Spinning industry crisis is spilling over to other allied industries. A survey of the areas housing the textile’s value added industry found that most of the mills either work only for a few hours or remain closed. According to Chairman Pakistan Textiles Exporter Association attributes this sorry affair with the high cost of business which has forced quite a few big business houses to roll up their ventures, he said. “The edge to Pakistan over India in terms of home made-up has seized to exist” explained, Ahmad Kamal, a successful exporter. He pointed out that all international chains have shifted their offices from Dubai to India where home textile is 5% cheaper than Pakistan.
The government instead of following prudent economic policy has taken expedient measures. The traders who control the chunk of the business are not made subject to any taxes, according to an officer-bearer of the forum of textile exporters. When asked why traders are not taxed, the response was self-explanatory: “They are PML-N voters and have a lot of street power.” One of the leading APTMA members pointed out that government did not take notice of textile crisis and but invited traders for high-level meeting after they threatened to go on strike against withholding on cash with drawls on banks and suspended advance tax on banking transaction till September.
“It is in fact suicidal act to setup any industry when there is no energy available and even they can’t get electricity from power units set up by the private sector,” said an industrialist who recently went for expansion of his spinning unit. A prominent member of Lahore tax bar further added that it is easier to do trading, earn fat money and still stay out of the tax net.
How to bail out the textile industry in order to protect the bread and butter of millions of workers and their families should be the source of concern of all the stakeholders who are in the realm of policy-making. In order to make the textile industry viable and competitive with neighbors, the government needs to take the following measures: (1) abolish all the incidentals on export; (2) prioritize the implementation of the textile policy; (3) ensure uninterrupted energy supply; (4) pay all the pending genuine refund claims expeditiously ; and (5) impose regulatory duty on yarn and fabric import. What would be the result if these measures are taken? Goher Ijaz, prominent leader of APTMA has an answer. If total textile chain is made viable and convert existing yarn and fabric in made-ups, it could trigger additional export worth 15 billion dollars. Whether the government is serious to encourage industry which will add millions of jobs as happened in India and China or not remains a mere spectator is a million dollar question.
Author is former senior officer of FBR.
Email: Shafqtanand@gmail.com
Twitter: @Chafqat