| November 5, 2001 | Monday | haba’an 18, 1422 |
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A ruling worth emulating
Unfair and ill-advised
THAT the government has at last decided to allow the textile industry to import machinery and equipment from India, which are generally less expensive than those from the western and other sources, will be greatly welcomed by the All-Pakistan Textile Mills Association (APTMA). The association has been demanding permission for such imports for a long time, but until now the government has been inhibited by considerations other than economic. Although the official word to this effect has not come out yet, reports suggest that the recommendation made recently by the Federal Textile Board that the import of textile machinery from India be allowed has been accepted by the president. The members of APTMA are planning to modernize their plants in anticipation of opening up of the textile sector to free trade after 2004, requiring them to compete in better-quality foreign products in both world and domestic markets — without the protection of quota allocations or any form of price incentive or export subsidy.
While the oncoming free trade system offers immense opportunities to our manufacturers, it also presents a serious challenge from such textile giants as China, India, Brazil and Malaysia. Until now quota restrictions have been partially working to our benefit by influencing the importers’ decisions through quota availability at a particular time. After 2004 it will be mainly quality and price which will determine the choice of the buyer. This makes it imperative to adopt all possible measures for cutting cost and improving quality.
To measure up to the demands of free competition, textile mills in Pakistan are planning to install new machinery costing $ 500 million during the next three years; of this $ 200 million worth of plant and equipment are to be imported during the current fiscal year. Until now normal economic considerations of buying from the cheapest market were being waived aside in favour of political ones, with the result that the textile industry has incurred additional liabilities in capital expenditure by buying from costlier sources. This policy has made our products less competitive on the whole. Now with free trade coming into play, economy and efficiency at all levels will be the determining factors and Pakistani entrepreneurs will have to explore the cheapest sources of machinery and raw material. At present India is said to fill the bill with its textile machinery 30 to 40 per cent less expensive than our traditional suppliers, inclusive of cost, freight and other charges. This is a lot of saving.
Although India is less expensive, it poses other problems which have to be kept in view. It manufactures machinery with the benefit of latest know-how under licence from the West just as it produces manufacturing equipment of its own design which is far inferior. The one made with foreign collaboration is said to be tied in some cases to the condition that it would not be exported. In view of this, care has to be observed at every stage in buying textile machinery from India to make sure that there is no discrepancy between what has been contracted for and what is being delivered and that no problem subsequently arises as to the supply and availability of spares and replacements. Arrangements will also have to be made by Indian suppliers, in collaboration with local vendors and service houses, for service and fabrication of parts that may be frequently needed.
Had our entrepreneurs, especially the textile magnates, been a little more far-sighted and less greedy, they would have taken the initiative a long time ago in creating the needed fabrication capacities within the country to cater to the big domestic market. Opportunities at different times were offered by China and other machinery fabricators to set up joint venture facilities but these were ignored preferring imports which carried ‘benefit’ of commissions. Now that Pakistan has planned to enhance the textile sector’s share in GDP from 7.5 per cent to 9 per cent and its exports from the present $ 5.5 billion to $ 14 billion in the next four years, the textile sector has to be modernized and expanded that also calls for the creation of an adequate machinery fabrication capacity. No thought seems to have been given to this aspect. This must receive top priority in future planning.
IN A landmark decision, the Supreme Court of India has directed all state governments to ban smoking in public places, including public transport. The court ruling affects hospitals, public offices, libraries, schools, court buildings, auditoriums and trains. The court has also asked the state governments to inform the court as to what action has been taken — as required under law — against cigarette manufacturers who violate a ban on tobacco advertising put in place by the Indian federal cabinet earlier this year. Over the years, India’s highest court has given numerous rulings with far-reaching implications in favour of public interest.
In Pakistan, the situation is quite disconcerting. Smoking is officially prohibited in public places like airports or hospitals and government offices but the ban is hardly implemented. The lack of enforcement stems primarily from the fact that those entrusted with enforcing it are themselves usually the ones who violate it. As far as cigarette manufacturers themselves are concerned, the government, and PTV in particular, seem quite beholden to them. The standard excuse against a blanket restriction on tobacco advertising on television is that it constitutes a major part of PTV’s revenue. The other is that tobacco companies pay hundreds of millions of rupees every year in excise duties. Both these arguments are not entirely without fault. The first assumes, perhaps a bit incorrectly, that no other sponsors would step in to fill the void left by tobacco manufacturers. But this is exactly what has happened during the coverage of the Sharjah cricket tournament where a multinational is advertising detergent powder in between overs. The second argument is also quite fallacious because several governments — Canada being a good example — have levied high taxes on cigarettes and seen not only a decrease in the level of smoking but also an increase in tax revenue. Who says that neighbours can’t learn from each other. Pakistan would be better off if it emulated India’s anti-smoking policy.
AS the government deliberates on reforms in the power sector, one of the ill-advised measures under review in Islamabad is whether to introduce different power tariffs in different parts of the country, depending on how profitable or otherwise a given power distribution company is. Judged on that tough premise, the arrangement, if put in practice, will only see four out of the total of ten power distribution companies reduce their tariffs, while the remaining six will have to raise the tariff by up to 50 per cent. This makes absolutely no sense for the obvious reason: why should the consumers be made to pay more to cover for their utility’s inefficiency and mismanagement?
The four ‘good’ companies are those of Lahore, Gujranwala, Faisalabad and Islamabad. This means that saving the areas served by these companies, people living in the rest of the country will end up paying much more for the same utility, which is not fair by any stretch of reasoning. The government should instead consider enforcing the measures and practices of the better managed ones on those that are running at a loss. The truth of the matter is that power loss through inefficient distribution systems and theft are the real culprits that need to be contained to keep this basic utility affordable for the general public. Raising the tariff only punishes those consumers who have been paying their bills, while the thieves continue to have a field day at their expense.