PAKISTAN: New investments in textile machinery, technology - Government to give 50 percent mark-up support

According to sources, these incentives are under Technology Up-gradation Support Order 2010, in pursuance of entry 7 of item 29A of Schedule II to the Rules of the Business 1973, to support the investments aimed at upgradation of textile machinery and technology.

According to a notification, No 3(1 8)TID/10-P-I, issued by the Ministry of Textile Industries, this order will cover whole of Pakistan for five years, from September 1, 2009 to June 30, 2014. Disbursements under 'Technology Up-gradation Support Order' will continue for the duration of loans obtained till June 30, 2014 and this facility will be administered by commercial banks and DFIs.

Under the Support program, for projects exceeding investment of Rs 10 million in machinery or technology, the Federal Government will pick up 50 percent of mark-up, subject to maximum 5 percentage points pa, whichever is less. In addition, for projects with investment in machinery and technology not exceeding Rs 10 million, the Federal Government may provide grant up to 20 percent of capital cost, for new Plant and Machinery only as 'Investment Support'.

This support will be available to SMEs as defined under the SBP Prudential Regulations for SMEs. According to the notification, the repayment period will not exceed ten years, including grace period, as may be allowed by the State Bank of Pakistan, and the investment support will be provided to existing and new textiles units registered with Ministry of Textile Industry.

However, mark-up support shall not be available to borrowers having non-performing loans, classified under SBP Prudential Regulations. Further, it will also make the borrowers ineligible for availing the support during remaining period of the loan if their loans are classified after introduction of this support.

In addition, mark-up support will not be available for loan disbursed before September 1, 2009. The investment support shall cover only the technology and machinery identified under this Order by a Financial and Technical Committee to be constituted and notified by the Ministry of Textile Industry. The Committee shall also permit the percentage of interest reimbursement/capital grant by the Government of Pakistan, depending on the technology and value-addition.

As per notification, Industrial Stitching Machines, Garment Dyeing Machines, Garment Special Effects Machines, Processing Plants, Shuttleless Looms, Knitting Machines, Yarn Dyeing, Yarn Singeing, Open End Machines, Ring machines for finer Counts, Ginning Machines, Power Generation Equipment for Textiles and Clothing Units, Effluent Treatment Plants, Energy saving equipment, Textiles testing equipment, CAD/CAM/CIM system, Machinery for Technical Textiles/Non Woven, Quilting machinery and equipment, Fibre/Filament Manufacturing Machinery 20 and Machinery attachments for value-addition including Coarse filament yarn, Compact Spinning, Spandex yarn and Siub yarn would be eligible for support project.

However, the Government may periodically review and revise the list in consultation with the industry. The facilities would not be used, or availed, in duplication ie plant, machinery and equipment financed under SBP's LTFF Scheme and or any other support or concession of Government of Pakistan shall not be eligible for the support under this Order.

The registered units would furnish data and any information related to the unit's operations, domestic sales, accounts and exports as and when required by the Ministry of Textile Industry. It would be the responsibility of commercial banks /DFIs to assess the viability of the projects and financing requirements. The credit decision of the commercial bank/DFls would be final.

After disbursement of loan, either in part or full, the banks or DFIs may approach the Offices of State Bank of Pakistan, BSC (Bank) concerned for obtaining mark-up support as mentioned in clause 4(1). The credit risk under the scheme shall not be borne by the government, and it would be the responsibility of commercial banks/DFIs to forecast the interest repayment on six-monthly basis and provide such information to SBP and Ministry of Textile Industry.

Mark-up support will be paid by commercial banks on six-month basis in March and September each year subject to release of funds by the Federal Government for relevant fiscal year. The State Bank will reimburse the amount of mark-up rate support to commercial banks by debit to the appropriate Federal Government account to be intimated by the Finance Division.

The ministry of textile industry has made it clear that the federal government reserves the right to make any changes, additions, deletions and modifications in the scheme under this Order which it may consider necessary. Any unit which in contravention of the provisions of this Order, through acts of omission or commission, files fraudulent or false claims shall be liable to penalties, as may be prescribed by the SBP or Ministry of Textile Industry.

The appellate authority, where penalties have been imposed by the SBP, will be the Secretary, Ministry of Textile Industry, while the details and procedure for the Technology Up-gradation Support would be prepared and announced by the State Bank.