Pakistan - Spinning Industry Reaches Crisis Point
Source: Business Recorde Date: 2007-07-05
he ship of textile spinning industry was sinking; more than 130 spinning units were closed down before June 15, while more than 12 units stopped their business during the last 10 days, rendering jobless to 500,000 workers directly and 2 million people indirectly.
This was stated by Chairman All Pakistan Textile Association Adil Mehmood in a letter written to President General Pervez Musharraf. In the letter, Adil mentioned that the mark-up has rendered textile industry uncompetitive. When textile industry made its $5 billion investment, interest rates were 4 percent and they are now close to 15 percent, showing an increase of 300 percent to 400 percent in less than three years.
This is unbearable. He stated that textile sectors have made study of 18 textile industries those were in profit in 2004 and are now in huge losses. If the affect of only one item, increased finance costs is taken as a constant then this group of 18 loss making and so called "inefficient" mills become profitable. This is only one costs factor that is taken in this study, he further mentioned.
’’We request 7.5 percent rate of mark up on short and long term loans of all textile spinning industry whether the loans are classified or not. Repayment to be over seven years. Leasing to be included’’, he wrote.
He requested that 3.5 percent RandD have been provided to the polyester staple fiber industry, which supplies us, the raw material. RandD is already available to the fabric, garments and processing sector. Only sector that is missing is spinning. He requested that 5 percent RandD on all local and export sales of yarn of the textile spinning industry also.
He made an appeal to President to remove the impact of cross subsidies as recommended by the Ministry of Petroleum and Natural Resources in February 2007, and the burden of electricity pilferage and tariffs kept low for social reasons etc, which filters through into higher tariffs for industry. He also requested 25 percent reduction in utility prices for the textile spinning industry.
Many of our members have given up hope of survival and revival or are simply tired of the ongoing cost increases and unfair competition being faced from Bangladesh, India and China, which are giving huge subsidies to their textile industry.
He also requested that an easy exit scheme be designed for those who want to quit and give up. Criminal provisions must be removed from banking recovery laws, he also demanded.
He requested the President to kindly intervene and help rehabilitate the spinning industry. Moreover, Tanveer Sheikh, the spokesman of All Pakistan Textile Association said that the Economic Coordinating Committee (ECC) headed by Prime Minister Shaukat Aziz, discussed a support package of Rs 2 billion for the textile industry and R and D support to the locally-produced polyester staple fiber (PSF).
However the Textile minister in his meeting with Apta has assured the members that the 3.5 percent R and D announced for the PSF manufacturing units, in the Budget speech 2007-2008, was meant for the textile-spinning sector and would be passed on by the PSF manufacturers.
He said that the Textile Ministry is very important, as it is responsible for 65 percent of Pakistan’s total exports and overlooks the industry, which provides 40 percent employment to the labour force. He said that the last sale price of PSF was Rs 89 per kg on which 3.5 percent RandD come out to Rs 3.12 per kg. The entire textile chain was hopeful that the decrease in PSF rates would be announced on July 02, 2007, but it has not happened. Current rates being offered from china are $1.34 per kg.
