LAHORE: Textile industry wants special subsidy on loans

LAHORE: The textile industry wants a special five per cent interest rate subsidy on its entire range of short to long term loans to overcome the liquidity crunch.

It also demanded uninterrupted gas supply to the entire textile chain.

In a statement issued on Friday, All-Pakistan Textile Mills Association (Aptma) chairman Gohar Ejaz said the energy shortage followed by inventory losses due to sudden decline in global cotton price had hit viability of the industry leading to a crisis-like situation.

“The $10 billion investment on machinery is becoming redundant in the presence of 10 to 12 hours load-shedding of electricity and suspension of gas supply for 150 days a year. There is no standby arrangement of electricity and it is very difficult to operate on alternative fuel other than gas to keep captive plants operational,” he said.

According to him, the cotton season was on full throttle and the industry would have to procure one million bales in August followed by another two million bales in September.

Gohar said he was due to interact with government policymakers next week to seek seven days a week uninterrupted gas supply to the textile industry. Further, he said, he would pursue the government policymakers for special facility for the industry for creating liquidity.

He said the textile industry had booked huge inventory losses due to stuck up yarn for four months when the prices fell from $2 to $1 per pound.

“The same situation has emerged in India where the government has facilitated its textile industry by providing a special 7.5 per cent rebate on exports and 5 per cent interest rate subsidy on loans,” he said.

Similarly, he said, Pakistan should also support its textile industry by a one-off 5 per cent mark-up rate subsidy on all long term and short term loans to create liquidity and save the industry from bankruptcy.

He said the Indian government had also messed up textile industry last year by banning export of cotton and yarn. “But now India is following Pakistan’s policy of free market mechanism, which is Aptma’s vision, to reverse the situation and it has given retrospective rebate to yarn producers in view of large cotton crop in order to let them shore up liquidity.”

Gohar said this one-time interest rate subsidy on all outstanding loans would create the much-needed cash flow because the fall of cotton prices internationally had put all the players into a difficult situation.

“The containers for the period of April and July are yet stuck up and there is an urgent need to address liquidity crisis, which may turn into non-performing loans (NPLs) if no financial support is extended,” he warned.

Gohar said it was increasingly becoming impossible for the industry to operate at 14 per cent plus mark-up, especially the textile industry being the export industry was the victim of both high cost of borrowing and inflation, which was not possible for industry to pass on to foreign buyers.

It may be noted that 1.6 million cotton bales remained unconsumed during the last quarter of the last financial year due to three days a week gas closure.

He said the government had not provided 3 per cent mark-up subsidy for over last two years and it was high time to settle this facility by offering five per cent mark-up subsidy on short and long term loans for the entire textile chain.

DAWN