29 - Feb 04, 2001
Textile Vision 2005
Banks and development financial institutions (DFIs) have
decided to lend long-term funds to textile mills under textile vision 2005 at a
floating interest rate indexed with the State Bank repo rate. But the millers
say they must be heard before this proposal is made part of the policy, being
framed to prepare Pakistan to compete in a quota-free market by 2005.
Bankers said a group of leading banks and DFIs had decided to
charge 1.5-2.0 per cent above SBP repo rate from those seeking long term funds
under the policy. They said actual interest rate would be determined in line
with the borrowers ability to earn and repay adding that good borrowers might
get cheaper financing.
"This will not do any good unless banks and DFIs consult
the millers," said Mushtaq Vohra, vice chairman of All Pakistan Textile
Mills Association. He said banks and DFIs must consult the APTMA before taking
any decision on lending rates structure of the textile policy. But he admitted
that linking of interest rates with SBP repo rate was one way of keeping them at
right levels amidst changes in monetary policy.
The SBP repo rate is the rate at which it lends overnight
funds to banks and DFIs as a lender of the last resort. The central bank's repo
rate is a key monetary tool. It is raised or reduced to keep monetary expansion
at the desired level. At present SBP repo rate is 13 per cent and SBP has not
indicated any change in it in near future.
This means that banks and DFIs may lend long term funds at
the rates ranging between 14.5-15 per cent, if they keep the mark-up at 1.5-2.0
per cent above SBP repo rate. Chances are that in few good cases, they may lend
even at the repo rate itself i.e. 13 per cent but in many other cases they may
charge the mark-up at more than two per cent over the SBP repo rate.
Head of a leading DFI told his institution was charging 16
per cent on long term loans, adding that most of the borrowers had a reasonable
Private sector asked to use coal
The Sindh Coal Authority (SCA) is pursuing the private sector
to use coal as fuel instead of furnace oil or natural gas. So far cement
industry has shown its willingness to use coal.
"The expenditure of coal (local) comes to Rs139 million
in case a cement factory of 3,000 tcd uses it as compared to furnace oil of
Rs722 million," said director general, SCA, Ahmeddudin Hanjrah at a press
conference on Thursday at the SCA office.
He said the expenditure of using natural gas as a fuel by a
cement industry came to Rs399 million. The cost of using imported coal is
estimated at Rs214 million.
If other industries also utilize coal as a fuel it would save
foreign exchange and reduce their cost of production, he added.
A comparison on per capita power consumption of coal reveals
that Pakistan stands at number 15 at 414 kwh out of 18 countries, in which the
USA is on top with per capita consumption of 11,161 kwh.
Banks asked to finance SMEs
Governor State Bank of Pakistan Dr Ishrat Hussain has pleaded
for providing bank loans to small and medium enterprises, which can utilize the
He was speaking at a luncheon meeting organized by the Sukkur
Chamber of Commerce and Industry on Tuesday, where he blamed the nationalized
banks for advancing big loans to industrial projects, which failed to become
The State Bank governor also held political influence
responsible for bad loaning and mentioned the example of Small Business Finance
Corporation (SBFC), which had failed to come up to the expectations.
"The days of heavy industries are over," Ishrat
remarked in response to a demand made by the president of the Sukkur chamber
Khalid Mehmud, who asked for setting up of big industrial projects in Sukkur.
Change in management
The sponsors and owners of 105 sick industrial units have
failed in convincing the private sector-dominated committee on revival of sick
units to get their loans restructured and rescheduled, along with a refusal to
"Probably, half may get relief in rescheduling, but only
after a change in the management", Tariq Hameed, Chairman of the Committee
for Revival of Sick units said.
Subsidy on wheat to go
The federal government has decided to abolish subsidy on
wheat and provide the commodity at uniform rates throughout the country from
next financial year.
This was disclosed at a meeting of a sub-committee of the
Economic Coordination Committee of the Cabinet and the office-bearers of the All
Pakistan Flour Mills Association on Tuesday.
Govt to expedite oil and gas exploration
Major General Pervez Akmal, Managing Director OGDCL announced
that a comprehensive plan has been prepared to further accelerate oil and gas
exploration in the country.
The Oil and Gas Training Institute (OGTI) will soon be handed
over the task of undertaking upstream and down-stream activities in oil and gas
He announced this while awarding certificates to the
participants from various Oil and Gas companies at a ceremony held at the
conclusion of a Seminar, jointly organized by Oil & Gas Development Company
Ltd and Canadian International Development Agency (CIDA) at Oil & Gas
Training Institute (OGTI).
Car production soars
A clutch of new models of small cars and signs of an economic
rebound helped boost car production by 18 per cent in July-December 2000-2001 as
compared to same period of 1999-2000.
Car production stood at 17,555 units during the last six
months as against 14,891 units, thanks to rising popularity of new and
redesigned small passenger cars.
Habib Arkady Limited — producer of high fructose syrup and
liquid glucose — proposes to make investments in setting up an in-house power
plant. The company said that a wholly-owned subsidiary 'Habib Power (Pvt)
Limited' would be established with equity investment of one million rupees.