Govt, stakeholders reach consensus on cash subsidy for textile sector

ISLAMABAD: The government has decided in principle to implement the Textile and Apparel Policy 2020-25 after reaching consensus among stakeholders over cash subsidy for lower utility rates with the aim to boost production and exports of value-added textile products.

A formal decision in this regard was taken in the Economic Coordination Committee (ECC) of the Cabinet. The policy is expected to be presented in the next cabinet meeting for approval.

An official source privy to the meeting told Dawn that it was decided that concessionary tariff on electricity and gas will be provided to processing industries only. However, it was decided that a separate policy will be worked out for the captive power plants in consultation with the Commerce Division.

As per the decision, proper work will be made on evolving competitive energy prices, while taking into account the regional countries. The working will be presented in the budgetary documents along with an allocation of amounts in the upcoming budget.

Plan aims to lift textile, clothing exports to $20.8bn by 2025

The proposed policy, which will be the third such plan, estimates three scenarios including measures that will lift the textile and clothing exports to a minimum of $15.7 billion and a maximum of $20.8bn by end of the year 2025.

The policy is laden with measures to tackle issues confronting the textile sector amid Covid-19 that has resulted in supply chain disruptions, affected global prices of commodities hitting trade adversely. It also addresses the issues of the withdrawal of SRO-1125 and cost of doing business.

Furthermore, the policy should attract domestic and foreign investment in the textiles value chain and the development of value-added sectors, with prime focus on small and medium enterprises (SMEs). However, the incentives only focus on reducing the cost of doing business in existing industries and no specific link is proposed to either enhance exports or expand production lines.

The past policies only subsidised export proceeds instead of widening the production line. The textile and clothing industries are operating at full capacity to meet buyers’ demands.

Under the policy, the government will continue supply of subsidised electricity and lower rates for the supply of RLNG and system gas. The government will also allocate for payments under the Drawback of Local Taxes and Levy (DLTL) scheme. Currently, the government provides cash subsidy under the DLTL scheme launched by the previous government.

It was also decided in principle to bring no change in the existing Export Finance Scheme (EFS) and Long Term Financing Facility (LTFF) schemes.

It is also under consideration to revive LTFF and refinance scheme for SMEs and indirect exporters. Textile machinery and spare parts, accessories, dyes, and chemicals will also be included in LTFF schemes of the State Bank of Pakistan. Similarly, a brand development fund will be launched besides revitalising the Pakistan Textile City Ltd (PTCL) and Karachi Garment City Ltd (KGCL). Special Economic Zone status will be granted to PTCL and KGCL.