September 04, 2007	Tuesday	Sha'aban 21, 1428

KARACHI, Sept 3: Textile mill owners are complaining of problems in getting fresh credit ceilings from banks for financing cotton this season as a large number of textile companies defaulted on payment of their outstanding loans.

Loan defaults are roughly being estimated at Rs80 billion or so, and banks are showing reluctance to release fresh credit ceilings to millers in the wake of reports that a record bumper crop of 14.5 million bales is expected to be harvested this autumn. Leaders of the All-Pakistan Textile Association (Apta) are seeking intervention of the government and State Bank of Pakistan to persuade banks to give them a two-year relief in payment of principal amount and interest on Rs80 to Rs100 billion loans on textile sector.

“The total amount of outstanding loans on the textile sector is about Rs120 billion that includes payment to a large number of private parties, which may end up as defaults if no relief is given,’’ Adil Mahmood, the Apta chairman, informed Dawn by telephone.

“In case no relief is given, there is a looming danger of closure of the textile sector, default of entire Rs120 billion loan and industrial landscape in Pakistan getting littered with sick, dead and dying textile mills,’’ the Apta leader did not mince words in portraying the emerging scene.

“At present 109 mills are already closed down and a large number is on way to closure,’’ he said.

“On revival of normal business after June 2009, we promise to pay full amount plus any agreed penalty to the banks,’’ the Apta leader declared.

“We seek a business solution of a business problem in which banks stand a chance to recover their loan amount with interest and also penalty from textile mills and a long-lasting relationship based on mutual benefit,’’ he argued.

Apta is the breakaway group of All-Pakistan Textile Mills Association (Aptma) and is holding meeting with Prime Minister’s Adviser on Finance Dr Salman Shah and secretary textile on Tuesday in Islamabad to seek their support and intervention on what is being called financial burden on textile mills that may lead to their closure.

Textile industry leaders are pinning hope in harvesting a bumper cotton crop — 14.5 million bales — that should bring down cotton rate to Rs2,200 to 2,500 for a bale against about Rs3,000.

“About 10,000 bales of cotton are trickling every day in the market,’’ a local textile mill owner said who pointed out that the demand was much more.

Adil Mahmood is, therefore, proposing the government to allow import of Indian cotton via Wagah to meet the present shortage, bring down cotton prices and revive the closed textile mills. “We can consume up to 15 million bales of cotton,’’ he said.

Textile leaders want inclusion of cotton in the exportable list to China under the Free Trade Agreement (FTA). Yarn is not included in the exportable list to China in the FTA and there is a tariff of 3.5 per cent on its export.

A margin of 3.5 per cent tariff on import into China from Pakistan will give enough room for clearing built-up inventory in the mills and improve cash flow.

They also want import of polyester on easier and on less costly terms for revival of textile industry.

The government recovers hardly Rs50 million a year on polyester import and a small relief may not cost much to the government is their argument.

What is worrying the textile industry leaders is the slump in import of textile machinery. In July, the first month of the year 2007-08, the import of textile machinery is worth $40.84 million, which is less than $41 million worth of machinery import in June 2007 and $48.58 million in July 2006.

Textile exports during single month of July amounted to $951.93 million as against $931.14 million in a month earlier in June and $877.63 million in July 2006.

While yarn export is stagnant in quantity and value, the export of cloth is down by almost 24 per cent and that of towels by about 18 per cent.

“It shows a drop in yarn consumption by the domestic industry and hence a build up in yarn inventory,’’ said a local leader of textile industry who explained the growing default.

“Textile mill owners face difficulties in getting fresh line of credit and bank margins for cotton financing. It is putting whole operations into jeopardy,’’ he said.