The textile millers have sought an immediate attention of the State Bank of Pakistan (SBP) on tightening credit limits from the commercial banks, and demanded relaxation in regulations relating to Credit Information Bureau (CIB) for one year to facilitate the sector amid high season for cotton purchase.
Talking to Business Recorder, the textile millers pointed out that the 90-day condition set by the SBP for the commercial banks to declare a production unit "defaulter" was playing havoc with the industry, as the millers were not able to purchase cotton in the absence of credit limits from the banking sector.
"The high mark-up as well as high energy shortage-stricken textile sector is striving to survive, as according to some leading textile businessmen, over 50 percent units are classified as defaulters by the commercial banks because of delay in payments," they said. It may be noted that inflating banks' mark up and energy shortages, besides high cost of energy has put the industry into a troublesome situation and majority of the units are operating on over 40 percent productivity loss.
A refusal from banks on their credit limits is adding fuel to the fire. "How the textile sector can be sufficient enough to pay back the bank loans when the country itself is on the verge of default," said former Central Chairman of All Pakistan Textile Mills Association (APTMA) Abid Farooq.
"Also, the industry can only pay back if it has facility of credit limit to purchase cotton to earn and pay the banks," he added. Another active APTMA member Shahid Faraaz Warraich said the textile mills could pay back only bank loans, provided they are making profits.
"But if their credit limits are closed by the commercial banks because of the strict SBP rules and regulations, how the millers can purchase cotton and keep their production units viable," he said. According to the industry circles, the commercial banks, despite having an intention to help out the industry, could facilitate the sector because of the strict SBP rules and regulations.
The cotton prices, on the other hand, have also been slashed considerably from the level of Rs 4,100 per maund to Rs 3,200 per maund, a trend having adverse impact on the earnings of farmers community. However, the millers have a little to say on the point that why they did not enhance their capacities when bank loans were available on easy terms and at a very nominal mark up in between Rs 2003 and Rs 2006.
Majority of the millers preferred to invest in real estate sector instead of spending on capacity building of their technical employees to cut down productivity losses. It may also be noted that former Advisor to Prime Minister Dr Salman Shah has been criticising the textile industry for responding inefficiently to the emerging challenges.
Abid Farooq was, however, of the view that answer to diversion of the bank loans to real estate sector should be placed before the commercial banks and their clients. As regards inefficient managerial skills of the sector, he said the research organisations of international repute like Gezri International had declared Pakistan's textile sector as one of the most efficient sectors around the world.
"How the sector can outperform its competitors when the government prefers domestic consumers of electricity on industry," he said, adding: "The industry is still facing load shedding of six hours a day despite the fact that Water and Power Development Authority (Wapda) has announced end of load shedding."
According to the industry circles, poor negotiations by the government at the forum of World Trade Organisation (WTO) has actually brought miseries to the textile industry and the official negotiators ignored all recommendations of the industry. Bangladesh, on the other hand, successfully completed the negotiations and got the status of Least Developed Countries (LDCs) and enjoying facilities in Europe and the US.