ISLAMABAD, May 19: The National Assembly Standing Committee on Textile Industry on Saturday came down hard on the ministries of finance, food, agriculture and livestock and petroleum and natural resources for their extremely negative internal policies that had resulted in the present crisis in the textile industry.

The committee, which met to study the reasons and the present recommendations that might help revive the dying textile industry, observed that increase in the cost of doing business was the major cause of shutdown of nearly 500,000 spindles and mills, including big names like Bhuraywala Textile, Aziz Spinning and Adil Textile to mention a few.

From increase in utility tariffs, interest rates and the cost of finance affecting the investment as well as liquidity, lack of value- addition to keep pace with competitors, stagnant or decreasing unit values, capacity and productivity issues, greater support and incentives to close competitors alongside great preferential market access etc were some of the reasons the committee identified, which had resulted in the failure of the textile industry.

The textile industry, that was Pakistan's largest export sector contributing 67 per cent, registered only five per cent growth this year compared with textile exports that measured from $8.92 billion in 2004-05 to $10.11 billion in 2005-06 reflecting an increase of 18 per cent.

The committee noted that delay on part of the Central Board of Revenue (CBR) in refunding sales tax on export of approximately Rs100 billion for the last two years was hurting the industry to an extent that it had caused liquidity crisis in large units in Karachi and Faisalabad.

"Gas prices need to be rationalised. Textile industry is paying 12.81 per cent more than what they should be paying on gas bills," said Zubair Motiwala, MD Diamond Textiles, demanding that the government should bear the burden in order to make Pakistan's textile industry allot more competitive in the international market.

Export re-finance rate in Pakistan had increased from three per cent to nine per cent adding to the cost of doing business and the withholding tax from one to 1.5 per cent and export development surcharge of 0.25 per cent on every consignment were also increasing the burden, the committee pointed out.

According to a representative of the textile industry, the negative image of Pakistan in the world was an added problem. "The suicide bombing outside the Marriott hotel and the violence in Karachi on May 12 have put off foreign investors’ visit. Business is being directed to the neighbouring countries," he said.

The committee also pointed out that India and Bangladesh were subsidising their industry in cost factors and their industry was in a position to lower prices. Reportedly, there was about 15 per cent price differential in Pakistani products with its close competitors.

External trade and tariff barriers such as higher import duties by the USA and anti dumping duties by the European Union were also identified as major reasons for decreasing exports of the Pakistan's textiles.

"Pakistan needs to improve bilateral relations with the US for greater market access. Pakistan's textile industry provided employment to 42 per cent of the population and contributed nine per cent to the country's GDP. But it is the finance ministry that is unsympathetic and not willing to allow concessions to the dying textile industry.

Pakistan needs to transform its textile industry into an employment generating engine like India," said Muhammad Pervaiz Malik, a member of the standing committee.

The meeting was chaired by Ch Nazir Ahmed Jatt.