ISLAMABAD, May 16: The spinning sector is seeking swapping of about Rs14 billion loans to improve competitiveness and offset losses it faced on account of surge in interest rates, it is learnt.
Informed sources told Dawn that Prime Minister Shaukat Aziz would preside over a meeting on Thursday to listen to the problems faced by the spinning sector which is seeking swapping of expensive bank loans with less expensive long-term financing on the pattern of Rs31 billion swaps allowed by the State Bank of Pakistan to the rest of the textile chain a few months ago.
These sources said that spinning sector’s share in over $6 billion investment in the textile sector over the last couple of years was in excess of 47 per cent and it would not be justified if this industry was left out or discriminated against given the fact that rest of the value chain had been given significant comfort.
If allowed by the prime minister, the overall financial impact of such a swapping would be no more than Rs500 million, but it would give a substantial breathing space to one of the key sectors of textile industry, these sources said.
These sources said the spinning sector had obtained more than Rs21 billion over the last few years for technology improvement, of which, reasonable amount had already been repaid. The weighted average rate of interest on such loans now comes to a little less than 13 per cent.
Some sources said the Karachi Interbank Offered Rate (Kibor) was less than 4.5 per cent two years ago but has gone up to about 11 per cent now, while gas tariffs have increased by 53 per cent.
In spinning where power charges account for about a fifth of total costs and 42 per cent of conversion costs, competitiveness and profitability is adversely affected not only by the high electricity tariff for industrial users, but also by frequent outages - commonly an average of three per day - than heighten inefficiency and expense.
With funds they could otherwise use to automate some processes, many textile mills install back-up generators, further raising their costs of production.
