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Jan 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 track record.

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 funds properly.

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 viable.

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 any relief.

"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 sector.

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

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.