This is part of the textile package being designed for the Budget FY07. Nimble-fingered females are naturally better at sewing and stitching. Consistent quality and increase in hourly output is being sought by the industry among other improvements to reduce the cost of production in the textile sector value chain.
INTEREST RATE: The textile sector is seeking lowering of interest cost which has gone up by 8 percent during the last 20 months on an investment of over $5 billion, 48 percent, 24 percent for additional weaving capacity and rest towards finishing and knitting.
The industry is demanding reduction of 5 percent in the interest cost on $5 billion investment, besides lowering of export refinance rate by 2 percent. India is already giving 5 percent interest rate reimbursement of the normal interest rate for upgradation of technology in textiles.
Due to strident rise in interest rates, investment in textile industry has slowed down. If Pakistan is to expand its market share from the current 1.75 percent ($7.39 billion) to 5 percent of the $800 billion market by 2015 ($40 billion), it will need to invest another $7.748 billion by 2010.
This would meet the cost of expansion of existing 2 million tonnes spinning capacity by another million tonnes (investment cost $3.5 bn), polyester staple fibre expansion from 600,000 to a million tonnes will need $300 million investment; the existing weaving capacity of 6.5 billion square meters would need to be expanded by another 3 billion square meters - requiring $1.63bn; finishing capability enhancement from 2.7 to 3.7 billion sq. meters would require $1.7 billion; knitting has to go up from 550 to 1300 million pieces - $307 million; and readymade garments stitching of existing 650 to 940 million pieces - investment cost $22 million.
At present the industry is not utilising its expanded capacity in finishing, knitting and readymade garments, being out-priced by competition. "The more we produce the higher is our loss," say the exporters.
GAS: Another important concession being sought by the industry is lowering of gas tariff for the textile sector. Besides removing various levies and surcharges on utilities.
GOVERNMENT LEVIES: The textile sector as per Income Tax Ordinance is paying 1.5 percent (yarn), 1.25 percent (fabric) and 10 percent (made-ups) income tax from the proceeds received by banks on the exports routed through them. In addition social security, EOBI contribution, Export Development Surcharge and Workers' Profit Participation Fund are a heavy cost as the industry is labour intensive.
The industry estimates that $7.75 billion additional investment will generate 6.2 million new jobs. Therefore all these levies after expansion of the labour force from 800,000 to 7 million will have a direct impact on the cost of goods.
The State Bank of Pakistan and the Ministry of Finance have locked horns with the new Ministry of Textiles to work out a special package taking into account the demand of the industry and what is fiscally possible.