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Rs23b subsidy fails to help textile sector

ISLAMABAD — Government subsidies to the tune of more than Rs23 billion to the country’s textile sector over a period of past two years have failed to add even a single textile mill, and instead there are clear indications that a large amount of this subsidy has been diverted by the beneficiaries in the setting up of industries in other sectors of the economy.

When his attention was drawn to this fact, Textile Minister Mushtaq Ali Cheema confirmed that no single industry in the textile sector emerged during the last three years.

Cheema agreed it is true that some industrialists might have imported machinery for upgrading its quality or production capacity but no new mills has been set up in the country during the last three years. This is very unfortunate for the survival of any industry like textile sector, where flow of money is squeezing during the last three years, he regretted, but added that share of banking in short-term and long-term loans in the textile sector also witnessed a steady decline during the last three years.

Cheema also did not rule out possibility of diversion of money from textile sector to other profitable sectors. Asked about the impact of subsidies on establishing new mills, the Textile Minister replied that his ministry had no record to determine the impact. However, he said subsidies were meant to support the sector for increasing its competitiveness.

According to sources in the textile industry, most of subsidies have been diverted to other profitable industries, like cement, sugar and power generation, during the period under review. Statistics showed the government has dolled out more than Rs23.5 billion under the head of so-called six per cent research and development subsidies to the industry since April 2005 to August 2007.

The amount of subsidies will reach around Rs50 billion by June 2008, which is the last date for availing the facility. Many more billions are offered in re-scheduling of loans and under the export refinance scheme to the textile sector during the period under review.