The final closure call, if needed, will be given by APTMA Chairman after the outcome of his meeting with the relevant government officials on the industry’s pressing issues including bank loans. As much as 40 per cent of the entire bank loan portfolio comprises lending to textiles and huge debt defaults can give a severe jolt to the banking sector.
Advisor Finance Shaukat Tarin has promised to take positive steps “not in weeks but in days”.
“As a first step, the government should help us getting a two-year moratorium on the payment of bank loans,’’ Mr Waqar Monnoo, a former APTMA Chairman, demanded. “We will continue to pay interest on loans during the moratorium,’’ he added to assure that spinners and weavers will start making payment on principal amount after two years when ‘’we hope to be back on our feet and on a sound business track’’.
For a long-term relief, he suggested that the government in consultation with the central bank and commercial banks should work out a formula for a substantial cut in interest rate as, ‘’nowhere in the world anyone can do business on 20 per cent interest rate plus high utility cost’’. The issues pertaining to electricity and gas rates and supply, can be negotiated later.
Severe electric power outages, suspension of gas supply to industry in Lahore, Faisalabad, and other places in Punjab with onset of winter forced many businessmen to pull down their shutters and come on the roads.
Naeemul Haq, an industrialist from Faisalabad threatened self-immolation against suspension of gas supply and frequent long interruptions in electricity when, he felt, that he had no option but to close down his export-oriented factory, which he feared, would render 3,000 workers jobless. The government was quick to respond and restored gas supply but at the cost of Lahore which has started suffering ‘’low gas pressure’’.
Industrialists and traders marched on Lahore streets with a mock industry coffin on their shoulders early this month. The APTMA held several protest meetings and finally on January 10 convened an extra ordinary general meeting of its members in Karachi, Lahore and Islamabad to discuss future course of action..
Textile industry leaders recall that Chowhdry Ahmad Mukhtar, as the commerce and textile minister, made three attempts to get an approval for a relief package but the government did not oblige. Similarly, Syed Naveed Qamar as the finance minister, pledged to restore research and development subsidy on more than one occasion but nothing happened.
All this has made textile tycoons frustrated and bitter. Quite a few of them blame the government for rendering their industries inoperative. “When there is no gas, no electricity and no cash flow, how can you expect any business to run,’’ a business leader asked.
The government has indicated to work out restructuring loans with some payments on schedule and the remaining amounts to be staggered over a longer period. But textile business is apparently not ready to make any payment on principal amount for next two years because of ‘’acute crunch in their cash flow’’. The crunch has come from unprecedented hike in utility bills during the last 16 months or so, suspension of research and development subsidy since June 25, 2007, high cotton prices and, of course, a drop in export.
‘’Not only that the volume of textile exports is falling, our buyers in the US and Europe are drastically cutting down on prices and forcing us to supply them on deferred payment arrangement rather than on letters of credit’’, Arif Bilwani, a home textiles product exporter said.
A large number of textile exporters have little choice in the case of supply arrangement with their buyers in Europe and the US and there is a fear that many of them may not be able to realise export proceeds. “How many of us have the time and money to contest cases against defaulters in the European courts? Mainly because of this demand of deferred payment from European buyers, the textile export is being curtailed.
Export in the first five months of 2008-09, down by 2.23 per cent in dollar terms and up by more than 23 per cent in terms of rupee, was worth $4.37 billion or Rs334.60 billion. But exports in same period last fiscal amounted to $4.47 billion or Rs271.51 billion. The primary concern for textile business is falling average unit price. “We are exporting bigger volumes but getting much less money,’’ Javed Bilwani explained while adding that much more is being invested to produce export goods now and hence the problem of cash flow.
Akbar Sheikh, a former Chairman of APTMA from Lahore wondered as to why government does not provide gas to textile mills and IPPs in Punjab who have a total installed capacity of 1,500 megawatt. “Wapda suffers more than 45 per cent line transmission and bills non-payment losses’’ he said. “The generators in textile mills together with the IPPs canl generate and supply electricity with very little losses and contribute much more to the government revenue’’ he argued. He blames the government for failing to resolve micro issues.
Aziz Memon, a major exporter said the cost of textiles in Pakistan is 19 per cent more expensive than in India, if financial cost, logistics charges and hidden and known subsidy support are put together. ‘’How do you expect us to compete with India in the export market’’, he asks.
The fall in export of textile products has resulted in cutting down on job work in processing and stitching units, making hundreds of workers unemployed. If no remedial measures are taken, textile business says, the number of jobless will further swell in the months to come.