Daily Times, Pakistan
* Govt mimicking approach of previous regime
* Move described as ‘political rather than economic’
By Sajid Chaudhry
ISLAMABAD: Despite dismal exports performance in the outgoing Fiscal Year 2014-08, the textile sector is likely to grab a Rs 30 billion Research and Development (R&D) support for the next Fiscal Year 2014-09, a high placed government official informed Daily Times Saturday.
The Economic Co-ordination Committee (ECC) of the Cabinet which is scheduled to meet on July 1, 2014 at Karachi, in the chairmanship of the Prime Minister Syed Yousuf Raza Gilani, is likely to allocate the amount for R&D support for the textile sector, the official added.
The textile sector, which has already enjoyed a huge sum of Rs 19 billion subsidies as R&D support during the outgoing Fiscal Year 2014-08, has failed to produce results and over all sector sector’s exports have witnessed a decline of 2.5 percent. The textile exports during July-May period of outgoing Fiscal Year 2014-08 have managed to reach at $9.591 billion as against the $9.837 billion in the same period of previous Fiscal Year 2014-07.
After availing subsidy equal to $320 million in the last two years, the textile sector has failed to increase the textile export to the same level. Textile exports have witnessed a decline of $246 million in July-May period of outgoing Fiscal Year 2014-08 as compared to the same period in the previous fiscal year. The authorities concerned feel that R&D support should not be allowed, as this is making local textile industry more un-competitive and it is relying on subsidies rather than competition.
This textile subsidy is to be provided out of the budget estimates for the 2014-09 and it would be an additional burden on national exchequer. The present government, which has been criticising the previous government for allowing out of the budget R&D support to the textile sector, is going to repeat the same practice in the next fiscal year.
The previous government had not allocated a single rupee under the head of R&D in the budget for the Fiscal Year 2014-08; however, it approved and provided out of the budget R&D support to the tune of Rs 19 billion. However, the next ECC meeting is likely to approve a huge sum of Rs 30 billion as R&D for the textile sector without taking in to account the performance of the sector.
The authorities are of the view that R&D support was actually meant for product development and research for improvement in designs and export competition. According to the reports the R&D support is being misused to a large extent and authorities concerned have already decided to conduct audit of the textile units availing such subsidy.
At this point of time when the country is under pressure due to projected heavy budget deficit of Rs 737 billion in the outgoing Fiscal Year 2014-08, allocation of a huge amount as textile subsidy is being viewed as political decision rather than an economic one.
Budget deficit of the country has been estimated at Rs 661 billion and after ensuring saving of Rs 79 billion cash balance surplus of provinces, the consolidated budget deficit of the country is set to come down to Rs 582.3 billion in the upcoming Fiscal Year 2014-09.
Government has plans to borrow Rs 557.6 billion from internal and external resources to finance the budget deficit in the upcoming Fiscal Year 2014-09. According to the government’s strategy to finance the budget through opting different borrowing options in the next Fiscal Year , the government would borrow Rs 165.2 billion from external sources, non-bank borrowing of the federal government will be Rs 242.9 billion and Rs 149.5 billion are to be borrowed from banking sector. Apart from the internal and external borrowing options, privatisation proceeds to the tune of Rs 25 billion would also help bridge the income expenditure gap and meet the overall consolidated budget deficit of Rs 582.3 billion.
