Chairman All Pakistan Textile Mills Association (APTMA), Lahore, Amir Fayyaz, highlighted, at a press conference, the industry’s growing concerns with respect to government policies. Its woes range from the diversion of gas to upcountry domestic sector during winters thereby starving the industry of a critical input namely energy; as well as other related concerns that the Prime Minister had committed to resolving through a bailout plus incentive package.
The package was reportedly under consideration nearly three months ago with informed sources revealing to the media at that time that the Prime Minister had assured the APTMA members that the package would be designed to reverse the disturbing declining trend visible in this major export earner regardless of the grant of GSP-Plus status by the European Union effective 1 January 2014.
Fayyaz added that “the situation is fast heading towards a total collapse of the textile industry” and urged the government to conclude the consultation process within the week and announce the final package by the end of the month. It is necessary to recall that consultations between a five-member ministerial committee led by Minister of Commerce Khurram Dastigir and APTMA delegation led by Chairman Ejaz Gohar began in the first week of September this year. An agreement between the two was purportedly reached in the second week of September on three major proposals.
First, to reduce the electricity tariff to 9 rupee per unit, in line with the applicable tariff for APTMA’s regional competitors, instead of the 18 rupees per unit applicable rate in September 2015; however APTMA Chairman acknowledged at the time that the Prime Minister had directed that electricity tariff for the textile sector be reduced by 2.15 rupee per unit but lamented that this reduction would not enable the industry to compete with its regional competitors.
Second, Gohar had noted that the levy of 200 rupees per MMBTU gas infrastructure development cess with retrospective effect is merely adding fuel to the fire and urged the government to implement the recommendations of the Senate Standing Committee on Textile Industry.
And thirdly, it was agreed to zero-rate exports because there was no point in holding/delaying refunds.
Pakistan is currently on an International Monetary Fund programme which limits the ability of the government to raise expenditure and/or reduce revenue by more than what was budgeted. Given the fact that there was a 40 billion rupee shortfall in the current fiscal year’s first quarter revenue there is a perception that the government’s failure to announce the textile package is premised on its concerns that such a package, in addition to the farm package already announced by the Prime Minister, may be the last straw on the camel’s back that may lead to suspension of the IMF package.
Be that as it may, the Pakistani textile sector is the principal contributor to our exports and it is baffling why the government delays decisions that may choke the wheels of this important industry still further which would then compel the government to incur even more foreign loans in support of balance of payments (BoP) – loans that have to be repaid and which are rising each year even more than what is budgeted debt service annual payments due to the erosion of the external rupee value; and this in spite of the fact that the rupee is overvalued. Needless to add, loans in support of BoP are not used for development thereby further contracting the productive sectors within the economy.
Pakistan’s merchandise exports fell 3.5 percent in 2014-15 and by a whopping 17 percent in July 2015 on a year-on-year basis. And this decline is continuing. However the responsible ministry for this decline is not the Commerce Ministry but the Finance Ministry that takes critical decisions with respect to the budget deficit especially while on an IMF programme and its components particularly the outlay on current versus the development expenditure as well as on fiscal policy and borrowing from domestic and external sources.
It is extremely disturbing that the Finance Ministry’s fiscal policies as well as its heavy reliance on foreign borrowing is choking domestic productivity with a consequent negative impact on employment levels and the quality of life of people. It is time that the Finance Minister begins to walk the talk namely to focus on growth instead of a deficit reduction.
Source: Business Recorder