Authorities in Pakistan have responded to industry calls by introducing a Technology Up-gradation Fund Scheme (TUFS) for textile firms to subsidise and boost investments in new equipment.

Under the scheme, the government will pay 50% of the interest cost of new investments in plant and machinery up to a maximum of five percentage points a year - or whichever is less. For small investments the government will contribute up to 20% of the capital cost as a grant.

PKR1.6bn (US$16.82m) has been pledged in the current financial year for the scheme, with the amount increasing to PKR17bn (US$178.95m) by 2014.

The measure is a part of policy initiatives that aim to boost textile exports to US$25bn.

Mohsin Aziz, chairman of the All Pakistan Textile Mills Association (APTMA), said the TUFS scheme will help improve competitiveness and boost exports. He also urged the Ministry of Finance to allocate adequate funds as soon as possible for investments in new projects.

Gohar Ejaz, group leader of APTMA, added that power availability would be crucial to accelerate investment in textiles, even with the discounted interest rates.

The textile sector has withheld investment in the last seven years due to high mark-up rates and the ongoing energy crisis.

According to the International Textile Machinery Federation (ITMF), only 238,000 spindles and 1100 shuttle-less looms have been shipped to Pakistan since 2007.

Pakistan's textile and clothing industry has been receiving government assistance in the form of drawback on taxes, loans at reduced rates, reimbursements on social security taxes, tax-free import of machinery, and incentive schemes that favour the creation of large export companies.