Govt set to extend Rs600b subsidised loan to textile sector

[ahlam1399]

ISLAMABAD: With a view to increase the investment in the textile sector and broaden the industrial base of the said sector, the government is set to extend subsidised loan credit to textile sector up to Rs600 billion under the Export Financing Scheme (EFS) and Long Term Financing Facility (LTFF).Under Export Financing Scheme (EFS), the government is to increase credit limit to Rs400 billion from Rs226 billion for textile exports and enhance the limit of Long Term Financing Facility (LTFF) to Rs200 billion from existing Rs103 billion for investment in the textile sector.The loan credit under the EFS will be available at subsidised mark-up of 03 percent and under LTFF at 05 percent."Yes, we have prepared the summary for ECC (Economic Coordination Committee) seeking the credit limits under EFS and LTFF not only to increase the textile products’ export, but also enhance the investment in textile sector,’’ a senior official at textile sector told The News.The textile exporters, the official said, have started feeling the heat as the share of subsidised credit limit has dwindled to 27 percent from 41 percent in a year and the textile sector has been relying heavily on commercial loans at the discount rate of 10.25 percent that has been jacked up from 5.75 percent. The investment in the textile sector by borrowing the loans from commercial banks at interest rate of 10.25 percent is simply quite impossible which is why the authorities in the textile ministry have decided to suggest to ECC seeking the increase in the credit limits to textile exporters at subsidised interest rates of 3-5 percent under EFS and LTFF. More importantly, during the last 13 months, Rupee has devalued by 35 percent against the US dollar, which is why cost of financing for textile project has substantially increased along with the requirement of working capital and in the last 5 years’ time, the import of textile machinery remained almost stagnant.And to this effect, textile ministry, he said, is all set to submit the summary to ECC asking for the surge in loans’ limit to textile sector under EFS up to Rs400 billion from current loan credit of Rs200 billion for increasing the exports.‘’Likewise, for more investment in the sector, the ministry is going to propose to ECC to increase the LTFF limit up to Rs200 billion from current Rs102 billion.’’In addition, the textile ministry, the official said, is also set to recommend the increase in project financing limit top Rs03 billion from existing Rs1.5 billion. ‘’This will not only help cover the financing cost but also to encourage the large scale plants having edge in the economies of scales.’’It is pertinent to mention that State Bank of Pakistan (SBP) has since long been operating two vital schemes, including Long Term Financing Facility, for investment in plants and machinery and Export Financing Schemes (EFS) to provide the working capital. Both the schemes are export oriented and for the availability of credit to the textile exporters.According to the document prepared for the ECC, the total exposure of textile value chain by December 2018 stood at Rs1.000 trillion in which the Long Term Financing Facility stays at Rs112 billion and loans under Export Financing Scheme is Rs226 billion.The official document also unfolds saying that by December 2017, total loan exposure stood at Rs816 billion in which LTFF was Rs87 billion and EFS was Rs187 billion. The share of subsidised loan has decreased to 27 percent from 41 percent in a year and the textile sector has been relying heavily on commercial loans, and the discount rate has hacked up to 10.25 percent from 5.75 percent during the said period.The sitting government has already done a lot to decrease the input cost for export oriented industry by providing the electricity at 7.5 US cents per unit and system gas at Rs600 per MMBTU and Re-gasified LNG at $6.5 per MMBTU.http://feeds.feedburner.com/~r/com/cwEr/~4/4HYRKV60-o4

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