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Adverse impact of budget.

Post Budget reaction on equity values was depressing. State Bank index of share prices after depicting an upswing from 693.34 on April 15,1992 to 765.68 on May 6,1992 slided downward to 735.20 on May 20, 1992, indicating a fall of 21.97 points. Aggregate market capitalisation was reduced by Rs. 10.372 billion during the same period.

However, several sectors were badly hit by the new fiscal measures. it was a record high dose of taxation totalling Rs. 17.5 billion proposed in the budget. A year back new taxes totalled Rs. 13.9 billion and two years back Rs. 12.9 billion.

Several measures were favourable to corporate sector. For instance gradual reduction of corporate taxes over a period of 5 years is an encouraging measure for the corporate sectors. Other favourable fiscal measures are:

i) Establishment of special industrial zones in the private sector.

ii) Reduction of import tariffs from maximum 90 to 80 per cent.

iii) import duty cut on components of domestic appliances such as TV, air conditioners, refrigerators.

iv) import duty reduction on motorcycle parts.

v) Reduction in import duties for industries manufacturing battery cells, disposable syringes, baby milk food auto tyres, photographic films.

vi) New lower excise slabs for tobacco industry.

vii) The withholding tax on non-residents now reduced from 30 to 10 per cent thus brought at par with residents

The corporate sector would also be favourably affected by the measure allowing the private sector to float open-end mutual funds and the maximum limit of Rs. 50 million with drawn from the close end mutual funds. When these funds come out there would be rush to buy selective stocks.

Some adverse measures have affected several sectors. Excise duty imposed on cloth to generate as much as Rs. 6800 million has affected the textile sector. Powerloom sector was affected by 5 per cent rise in excise levy, 27 per cent rise in import duty and 100 per cent rise on the processed fabrics.

The imposition of sales tax at the rate of 12.5 per cent on leather articles has adversely hit the leather exports. Modarabas have also been brought under the tax net but after the expiry of three years from the year of commencement and one year grace period. A 5 per cent levy has been imposed on issue of new shares whenever subscribed more than one and a half times.

New floatations were few. Out of 8 new floatations 4 belonged to textile sector while 3 related to sugar. Nishat Tek received a subscription of Rs. 1030.021 million against the request of public subscription of Rs. 50.00 million which amounted to almost 20 times of the original offer. Table No. 11 gives further details of the subscription.


Fidelity investment Bank Limited: Subscription of this company is due on May 26, 1992. The company will operate as a financial services organisation geared to provide a wide range of services such as corporate financing, project evaluation and other capital and money market activities. The present share issue consists of shares worth Rs. 50 million including Rs. 10 million for NIT. Sponsorers include Khawaja Mohammad Kaleem, Jehangir Elahi, Jehangir Siddiqui, Shahzad Saleem, Usman Said and Amin Fayyaz Sheikh. Sponsorers belong to famous industrialists group operating mainly textile mills in the Punjab. Some of the mills are: Kohinoor Spinning, Chakwal Textile, Kashmir Textile, Amin Spinning. The company is likely to attract heavy subscription. Public issue has been underwritten by Elahi Enterprises (Pvt.) Ltd. and others.

Metropolitan Bank Limited: The Federal Government has reportedly sanctioned the establishment of Metropolitan Bank Limited in the private sector. This would be the eleventh bank allowed in the private sector. Ten banks were accorded similar permission in late August last year.

Metropolitan Bank is expected to be led by the former Governor of the State Bank of Pakistan Kassim Parekh, who has had an illustrious career in banking. He was the president of the country's largest bank - Habib Bank Limited and has also been the Chairman of the Pakistan Banking Council. Besides Kassim Bhai (his popular name), the sponsoring directors include Dewan Mohammad Umer Farooq with individual share subscription of Rs. 10 million. The collective not personal worth of sponsoring directors is Rs. 66 million.

Tandlianwala Sugar Mills: This mill is being set-up at Tandlianwala with a crushing capacity of 4000 tons per day to be extended to 6,000 TPD. The plant and machinery have been imported with the financial assistance of ADBP of Rs. 83.278 million. The total cost of the project has been estimated at Rs. 339.90 million.

Indus Motor Company Limited: The aim of the joint venture agreement between House of Habib (HOH), Toyota Motor Corporation, Japan, and Toyota Tsusho Corporation, Japan is progressive manufacture of Toyota vehicles and component parts with an initial annual capacity of 20,000 units expandable to 40,000 units or more to meet the requirements and quality standards of the automotive industry for the 21st century. A detailed deletion programme envisages a deletion of 55% (average). A deletion of 21.01% for the first year has already been approved. The projects submitted by House of Habib and Toyota was selected due to the popularity and reliability of Toyota vehicles in Pakistan and was sanctioned on April 30, 1989. The company was incorporated on December 17, 1989 and obtained Certificate of Commencement of Business on May 31, 1990. On July 01, 1990, the company was appointed Distributor of Toyota vehicles and Spare Parts (except industrial vehicles). The project envisages a total investment of Rs. 1,412 million, including equity of Rs. 786 million. A detailed project cost and means of finance has been provided hereafter. The production facilities are located at Port Bin Qasim Industrial Zone, near Karachi on land measuring over 105 acres at a cost of Rs. 37 million under lease by Port Oasim Authority. High quality metalled road to the factory site is available along with other infrastructure facilities provided by the Authority.

Pak-Suzuki's Car Plant: Final touches were being given to Pak Suzuki's new car plant at Pipri for its inauguration. The plant has already started trial production. According to plans, SF-410 (Sedan 1000 CC) car is the first chosen for introduction at the new plant. It will be followed by SF-413 (Sedan 1300 CC), SA310 (Khyber 1000 CC) and SB-308 (Mehran 800 CC) cars. The production of engines had started at the new plant in February 1990 while in 1991 the assembly of engines for SAA-31 0 (Khyber) car was introduced.

During the year ending June, 1991, the number of engines produced was 30,223 units, which met the total requirements of the company. With the commencement of vehicle assembly at the now plant, there will be both a marked improvement in the quality of vehicles and an increase in the indigenisation programme. About |deletion status'the Pak-Suzuki has already achieved the approved deletion target for June, 1991. Efforts continued for the achievement of deletion targets, approved by the Ministry of Industries for June, 1992. The management is optimistic that the completion of new plant in terms of technology, product quality and indigenisation would be a milestone in the journey of automobile manufacturing in Pakistan.
 General Aggregate
 index Market
 Number Capitalisation
 (Rs. in billion)
15.04.92 693.34 181.861
22.04.92 713.12 188.402
29.04.92 742.76 198.569
06.05.92 765.68 204.434
13.05.92 757.17 199.082
20.05.92 735.20 194.062
 Date of Amount Public
Name Subscription Offered Subscription
Ghemini Leasing 11.04.92 20.00 490.705
Al-Abbas Sugar Mills 23.04.92 104.173 117.80
Nishat Tek 26.04.92 50.00 1030.021
ldrees Textile 28.04.92 75.200 51.50
Reliance Weaving 03.05.92 55.00 118.00
Nishat Fabrics 12.05.92 84.00 959.00
Tandianwala Sugar Mills 27.05.92 88.410 -
J.D.W. Sugar Mills 21.05.92 102.886 -
Earning Per Share and
Price Earning Ratio
Allahwasaya 14.76 6:1
Chaudhry Textile 9.19 3:1
Pakistan Oxygen 8:61 20:1
Dawood Cotton 8.46 11:1
Quetta Textile 7.66 12:1
Annoor Textile 6.98 -
ICI Pakistan 6.06 14:1
Sui Northern 5.14 19:1
Bawany Sugar 4.74 26:1
Nagina Cotton 4.36 7:1
Kohinoor Textile 4.29 10:1
Al-Abid Silk 4.27 19:1
Glaxo Laboratories 4.12 26:1
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Title Annotation:new fiscal measures
Author:Haidari, Igbal
Publication:Economic Review
Date:May 1, 1992
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