KARACHI, June 25: The Union of Small and Medium Enterprises (Unisame) has urged the State Bank to stop export refinance under Part 11 of the Export Refinance Scheme for promotion of export.

President Unisame Zulfikar Thaver said in a statement that the availability of cheap capital under Part II was promoting hoarding of essential commodities thereby creating artificial shortage and price hike in the domestic market.

He urged the government to differentiate between the post and pre-shipment export refinance. He suggested that there should be separate mark-up rates of finance for post-shipment and pre-shipment consignments to check hoarding.

He said that the SBP should offer special reduced rates to the bonafide exporters who obtain finance after shipment. However, there should be higher rates of refinance for exporters who avail pre-shipment finance under Part II basket on their performance of previous year irrespective of the fact whether they have orders in hand or not.Exporters, who have refinance facilities under pre-shipment finance, purchase and hoard huge quantity of commodities and push the prices upward by creating shortage and then sell goods in local market and make huge profits, he alleged.

He further said that such exporters only became active in exports at the time of adjustment of refinance loan and arrange for prompt shipments to cover the borrowed amounts.

Mr Thaver said to discourage this ugly practice by traders the SBP should only encourage post-shipment finance as this will be a real facility for the genuine exporters whereas pre-shipment finance is really a facility for hoarders, black marketers and profiteers.

He cited recent example of prices of rice, wheat, and spices, which jumped high due to the manoeuvring tactics adopted by the traders, who manipulated the demand and supply position for their benefit.

Mr Thaver reiterated his demand for setting up an SME Export House as promised in the Trade Policy of 2006-07 and also urged supply of raw materials to the SMEs at reasonable prices.