Problems faced by the finishing sector

Pakistan textile industry is facing challenges due to social and environmental compliance issues from US and European buyers. The impact of environmental regulations on the textile sector of Pakistan can be classified according to many parameters. However, the major area of concern for the textile-processing sector is wastewater. Textile processing is a water intensive process. Rising cost of production coupled with high interest rate, is the big factor in making the products uncompetitive. On the other hand Pakistan offered the lowest unit price for its textile and clothing products even lesser than Bangladesh, India, China in international market. The government gave out a number of incentives in textile packages, research and development (R&D) support and swapping of costly loans to this sector. According to the State Bank of Pakistan financial institutions have disbursed Rs836 billion to textile sector during the first-half of the current fiscal year against Rs657 billion in the corresponding half last year, depicting a growth of 27%. Major chunk of Rs768 billion disbursed for the manufacturing of textiles, including spinning, weaving and finishing, manufacture of made-up articles, knitwear and carpet and rugs. The remaining Rs68 billion was disbursed on manufacturing of wearing, apparel, readymade garments and dressing. Due to shortage of gas and electricity textile industry — from spinning and weaving to value-added garments and made-ups and home textile units have begun downsizing workforce to save the costs. The industry is laying off part of its workforce from skilled and semi-skilled labour to junior and mid-career marketing and sales executives to cut the costs and reduce their losses. Recently government has agreed with the business community to continue zero rating facility for textile sector and 0% Federal Excise Duty, however it will impose withholding tax of 1% on this sector, 6% tax at yarn and 6% tax at dyed fabric. This scheme would be only for registered entities, companies and exporters. However, duty on import of raw materials would also remain zero.