The Economic Co-ordination Committee (ECC) of the Cabinet is to extend Rs 1.5 billion Government of Pakistan (GoP) financing guarantee for the Textile City, Karachi, sources close to Textile Minister told Business Recorder. Pakistan Textile City is located in the eastern zone of Port Qasim Authority (PQA) Karachi, on 1250 acres.
It is a joint venture of the GoP, public sector and the prime financial institutions. The land of Pakistan Textile City was acquired from PQA. Once completed, PTCL will offer various facilities for value-added sector including captive power plant, dedicated water pipeline, provision of natural gas, waste water treatment plant, workers residential complex, training institute, etc.
Initial paid up capital of the Pakistan Textile City was Rs 1.1 billion. The GoP had contributed Rs 500 million. Pakistan Textile City exhausted the initial paid up capital on acquisition of land and its subsequent development.
Sources said that to meet the emerging funds requirement, the Board of Directors (BoD) considered various financing options and observed that financing plan should be a mix of equity, debt and sale of land. Therefore, the BoD decided to enhance the share capital, and shareholders were requested to double their equity share. The ECC, in its meeting on January 21, 2008, had directed the Finance Ministry to arrange short-term finances for the Textile City project until the federal government''s share of Rs 500 million was released in the next financial year.
In pursuance of the ECC directions, Finance Division arranged government guarantee of Rs 500 million by April 2009. However, due to tight budgetary situation, Finance Division was unable to pay additional equity share of Rs 500 million. In order to complete the critical development works, such as approach road, water reservoirs, water supply networks, and administration block, which were required to initiate marketing for the sale of land, the Ministry of Textile Industry (Mintex) requested for additional government guarantee, enabling Textile City to arrange necessary funding.
Accordingly, a summary for additional bank guarantee of Rs 1.0 billion was moved to the ECC on May 7, 2009, to arrange from the banks, which would make up the shortfall of resource due to non-subscription of increased capital. The ECC accepted the request for the issuance of government guarantee of Rs 1.0 for Pakistan Textile City Limited for a period of two years.
"Rs 500 million government guarantee had already been issued, and additional funds were required for the development works to be undertaken. Therefore, the total government guarantee for Pakistan Textile City stands at Rs 1.5 billion," sources said. However, since the word ''additional'' is not mentioned in the decision, it is deemed necessary to seek confirmation regarding the total government guarantee amount. In pursuance of the Rules 18(4) of the Rules of Business 1973, the draft summary was sent to Finance Division for views and comments. Minister for Finance accorded anticipatory approval of the summary, subject to the directions by the ECC.
The ECC has been requested to ratify the anticipatory approval that total government guarantee for Pakistan Textile City Karachi stands at Rs 1.5 billion and the period of government guarantee is extended by further two years, sources concluded.
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