February 03, 2007	Saturday	Muharram 14, 1428

KARACHI, Feb 2: The financial impact of swapping of expensive bank loans with relatively less expensive under Long Term Financing for Export Oriented Units (LFT-EOI) obtained by the spinners for import of machinery since January 2003 comes to less than Rs500 million.

A recent presentation prepared by All Pakistan Textile Mills Association (Aptma) for the government reveals that total loans obtained by the spinners amounted to Rs22.28 billion for upgrading and improving the production techniques in anticipation of dismantling of textile export quota system in the US and Europe from January 2005.

Out of this total borrowed amount, the spinners show an outstanding amount of Rs17.10 billion on which the weighted average rate of interest comes to 12.45 per cent. Of this outstanding amount a sum of Rs6 billion is said to have been invested on import of spindles and related equipment. About Rs2 billion financing was done by the leasing companies which is not covered by the swapping arrangement being sought by the spinners.

Overall, the spinners seek swapping of a little more than Rs9 billion to LFT-EOI involving a financial impact of Rs497 million.

Textile mills borrowed a total amount of Rs30.47 billion from the banks since January 1, 2003 against which the outstanding amount is Rs23.82 billion. This includes the loans obtained for electric generators, which is more than Rs3 billion and the outstanding amount is Rs2.56 billion.

While spinners borrowed the bulk Rs22.28 billion, the weavers obtained Rs4 billion and all other value added sectors including the garments, processing and knitwear got only Rs957.90 million.

Since 1999, the textile sector imported machinery and equipment worth about $4 billion (Rs240 billion) and is said to have made an investment of almost equal amount in installation of machinery and purchase of local equipment.

The textile’s case is that since the time they started investment, there has been dramatic change in the environment.

Aptma has given a comparison of various factors affecting production cost since 2004. The Kibor was 4.32 per cent in 2004 and is now 10.54 per cent. The gas tariff is up by 53 per cent from Rs172.62 to Rs264 per MMBTU. The minimum wages have increased by 60 per cent to Rs4,000 from Rs2,500.

Inflation has spiralled up by 82 per cent to 8.5 per cent from 4.20 per cent. Similar diesel price is up by 64 per cent, furnace oil by 77 per cent and petrol prices by 71 per cent.

Aptma case is a swapping of expensive bank loans with relatively less expensive, revision of energy cost, review of gas, petrol and furnace oil price and withdrawal of non-revenue levies to bring down production cost so that Pakistan’s textile products can compete in the export market.