KARACHI, Nov 7: The All Pakistan Textile Mills Association (APTMA) has urged the State Bank of Pakistan (SBP) to allow commercial banks to substitute and adjust the contract at their discretion where exporters and manufacturers have obtained trade loan facility against their deposits under FE 25.

Exporters of gray and processed fabrics are confronting with falling per unit prices owing to extreme pressure on the US and European economies because of recession, cessation of export refinance facility for these goods since June 2001 and appreciation of the rupee against the dollar.

In order to reduce financing cost, exporters and manufacturers are now obtaining trade loan facilities from commercial banks against their deposits under FE 25.

The APTMA has also raised the issue with the Governor SBP Dr Ishrat Hussain in a recent meeting where senior members of APTMA were led by their chairman Anjum Saleem for sorting out the issue and getting a relief by making some changes in the FE circular 25 of 1998.

While submitting their case before the SBP governor the APTMA seniors pointed out that the facility under FE 25 is normally availed from various banks against export contracts with a particular buyer relating to different qualities and quantities.

They further explained that on many a occasions, partial shipments of several contracts are packed in one container according to instructions of the buyer. Finance against various contracts may have been obtained from different banks but documents for particular container, are usually submitted to one bank for partial adjustment of the facility.

Therefore, it is clear, the Aptma member said, that in such an eventuality, adjustment of the facility may take place at a bank different to the one the finance was originally obtained.

They further said that under the old refinance scheme, and even at the present moment where export refinance is available for commodities like bedlinen and garments, the State Bank allows adjustment but has expressly forbidden as stipulated in item d(I) of FE circular No 5, dated August 23, 2002, on the subject of Trade Loans under FE circular 25 of 1998.

The Aptma members further said that in view of the recession in export market, shipments against certain contracts are sometimes delayed or blocked by the buyers for a specified period or are asked to be made against new contracts. In the meantime, the maturity date for adjustment of the facility may expire without the shipment having been made.

In support of their argument they further said that sometimes contracts are cancelled before any shipment can be effected and the exporter is unable to adjust the facility against a specific contract in this eventuality.

Owing to these factors Aptma has urged upon the State Bank to allow substitution for unlimited time and even permitting change in the commodity where export finance facility has been allowed.