‘Textile industry performs responsibly, sincerely’

“The most significant testimony to impeccable credentials of the ministry is the formulation of the Textiles Policy 2009-14, which was approved by the cabinet and is presently under implementation”, a statement of the ministry of textile industry issued here on Saturday said.

The statement said while formulating the policy, the ministry consulted the entire value-chain of the textiles sector and all the representative associations were taken into confidence in finalizing the recommendations. This consultative process was not restricted to policy formulation only but in almost all difficulties faced by the industry, the ministry has adopted an approach that depends on industry’s involvement. From load-management of gas and electricity to handle yarn crisis, the ministry has played a positive and active role in resolving industry’s problems walking shoulder to shoulder with all concerned stakeholders of the textile sector.

It clarified that from the point the yarn crisis erupted in early September, 2009, the ministry has been engaged with all the stakeholders working to improve the domestic availability of yarn as local industry that comprises a large number of small units as well as employees nearly 80 per cent of all workers of the textiles sector was facing widespread closure.

Besides, it is the downstream and value-added sector that is the mainstay of the country’s exports, and its continuing decline seriously threatened the overall exports performance of the country, it added.

The statement further said despite that the ministry believed that the best course to follow was to let the market continue to function freely as it had been doing so for nearly two decades. “This advice, however, was not headed and exports of yarn recorded an unprecedented increase of nearly 50 per cent in the first six months of the year, whereas the unit value increased by only a paltry 25 per cent”, it remarked. It said there were many instances when heavy exports were made to East Asian markets at export prices significantly below the international and local prices, at a time of an unprecedented increase in these prices. The standing committees of national assembly and senate took serious note of the emerging conditions in the yarn and consequent adverse effects on the value-added sector and recommended strong measures to curb the unbridled exports of cotton yarn.

The cabinet committee on textiles, which had previously met in November, and December and urged caution on the part of the spinning industry, was then constrained to limit the exports through a quantitative restriction of 50 million kg per month for the period, January-June 2010, while exempting the value added yarn from this restriction.

The ministry kept monitoring the situation and was dismayed when in January 56 million kgs were exported against the limit of 50 million kgs. In the meanwhile, the supply in the local market remained constrained while prices kept rising. What was more disconcerting was the realization that the quantities of key value-added exports were significantly down, readymade garments 11 per cent, hosiery and knitwear 10 per cent and cotton cloth 23 per cent. Consequently, the ministry began to hold consultations with all the stakeholders to improve local supplies of the yarn to save the domestic industry from ruin.

The following measures were accordingly adopted by the government to correct the situation: The exports of yarn will be restricted to 35 million kgs per month for all kinds of yarn for four months from March 1, 2010 to June 30, 2010. Value-added yarns fetching a price of more than or equal to $3.5 per kg will be allowed over and above the quota to those units which are registered with the ministry of textile as value-added exporters and within limits of their assessed capacities as determined by the ministry of textiles.

Exports shall be monitored by customs on actual shipments and first-cum-first basis and registration with Trade Development Authority of Pakistan (TDAP) shall be dispensed with. The state bank of Pakistan (SBP) will provide exports refinance facility for import of 2 million bales of cotton to meet the shortage of cotton during the off-season and domestic sales of yarn by spinning mills will attract income tax at the rate of 10 per cent from March 1, 2010 to June 30, 2010.

The government is committed to working for the welfare of the textile sector as a whole. Whenever, any segment faces difficulties, the government has come forward to ease the conditions. The textiles policy has also extended the benefit of reduced mark-up cost to the spinning sector, for which a sum of Rs5 billion has been allocated, the statement concluded.