Textile mills seek govt help to close units: Losses become unbearable
By Nasir Jamal
LAHORE, May 16: Spinners want the government to devise a regulatory mechanism to facilitate the closure and possible subsequent liquidation of units incurring unsustainable losses because of internal and external factors.
“Some spinners have recently approached the Aptma chairman to speak to the government on behalf of the industry to work out some plan on the pattern of the bankruptcy laws in the United States (Chapter XI) for regulating the closure and liquidation of their units,” Aptma spokesman Akber Sheikh told Dawn on Wednesday.
Aptma has been claiming for the last several weeks that about 500,000 spindles have gone out of operation around the country because of unsustainable losses to the spinners due to a sharp rise in their production cost including increased interest rates, gas prices and indirect taxation during the last one-and-a-half year. But Aptma, often dubbed by government officials as the club of the rich businessmen, has not supported its claim with concrete evidence.
Aptma says the huge subsidies and other support offered by India, China and other countries to their textile industries is making Pakistan’s textiles further uncompetitive in the global markets. Further, it says special treatment given by the United States and the European Union to textile imports from countries like Bangladesh has made the competition in the world markets more uneven for the local industry.
But the Aptma officials refuse to name the mills that had completely or partially closed down their operations, saying it would lead their creditors (banks, leasing companies, etc) hounding them.
“Many spinners have given personal guarantees for obtaining the loans, which means that they have mortgaged their personal assets like houses, cars, and clothes to their creditors,” says Sheikh. “Their creditors will tear them apart should they announce closure of their operations in the absence of a regulatory framework controlling closures and liquidations.”
He says the spinners “in distress” want that a joint committee comprising government officials and Aptma representatives be formed to immediately work out an exit strategy for them.
Most spinners allege that the government has developed an unexplainable bias against the spinning industry, which is clearly reflected in its policies.
“If the government does not want to help us and ensure a level-playing field for us by reducing cost of credit and energy and making exports truly zero rating, it should put in place a regulatory framework that allows us to close down businesses without being harassed by the creditors,” says a spinner, who asked not to be named.
The textile industry has invested over $5.5 billion, half of which went into the spinning sector, in capacity expansion and modernisation since 2003. But Aptma says the investment in the textile industry has sharply reduced in the last couple of years and is expected to drop to around $450 million in fiscal 2007 from about $970 million in fiscal 2005.
The investment is feared to fall further during the next year because of rising cost of credit, which, Aptma says, has gone up by 140 per cent in less than two years.
“On the other hand, India’s textile sector is expected to attract investment of $36.5 billion in the next five years and will achieve the export target of $55 billion by 2012,” says Sheikh.
India’s textile industry is growing by 9-10 per cent. Its growth rate is expected to rise to 16 per cent in the coming years and create employment opportunities for about 17.35 million people by 2012.
