ISLAMABAD (February 09 2010): The Textile Ministry has asked Finance and Petroleum Ministries to withdraw cross-subsidy on fertiliser sector, which is putting additional burden on the textile sector, Business Recorder has learnt. The government is giving subsidy on gas to domestic consumers and fertiliser industry.

Other industries, including textile, are pressing the government to remove the cross subsidy to provide some relief to these units, too. They are of the view that due to cross subsidy, the cost of doing business has increased, making them uncompetitive in the global market.

Sources told Business Recorder that the National Assembly standing committee on textile industry in its last meeting on February 2 had also directed the Ministry of Textile Industry to work out the modalities for elimination of the cross-subsidy on natural gas.

The government had notified 18 percent uniform gas tariff for all consumers across the board from January 1, 2010. "But despite uniform gas tariff to all consumers, government is still giving cross subsidy to domestic consumers and fertiliser units," sources said, adding that the government is expected to give Rs 35 billion cross subsidy to the consumers during 2009-10. It is expected that the amount of subsidy would further increase by approximately Rs 6 billion with gas supply to Fatima Fertilisers and Engro Chemicals.

According to sources, Petroleum Ministry had earlier proposed to Finance Ministry to end the cross subsidy for gas consumers, which is increasing burden on some other sectors like textile. "But Finance Ministry had expressed reluctance to end cross subsidy as in case of elimination it had to allocate hefty amount from the budget for giving relief to domestic and fertiliser consumers," sources said, adding that according to agreements signed with fertiliser companies under Fertiliser Policy 2001, the government is bound to provide gas at cheaper rates.

The textile sector strongly agitated against the policy of cross-subsidy. It said that its exports have suffered a setback as a sequel whereof they were losing market to China and India due to high cost of production. Therefore, The committee recommended that the government should provide subsidy to the Textile Industry like other Asian countries. Moreover, the committee asked the government to provide level playing field to the industrial sector to compete with other Asian countries in the international market.

Copyright Business Recorder, 2010