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Budget and stock market.

Budget and Stock Market

The impact of budgetary measures on stock market was not very harsh. General Index of Share Prices compiled by State Bank of Pakistan showed a fall of 2.15 points on June 13 sliding downward from 284.40 on June 6 to 282.25 on June 13. Further decline of 1.04 was noted on June 20 when Index stood at 281.31. Aggregate market value of share price declined from Rs., 48.308 billion on June 6, to 47.838 billion on June 20, showing a fall of Rs. 470 million.
 General Aggregate
 Index Market
 Number Capitalisation
 (Rs. in billion)
02.05.90 292.70 49,196
09.05.90 291.13 49,247
16.05.90 289.28 48,929
23.05.90 286.22 48,691
27.05.90 283.85 47,909
06.06.90 284.40 48,308
13.06.90 282.25 47,960
20.06.90 281.21 47,838

The Budget 1990-91 contained several incentives for the investors. Difference in Tax rates between the listed and the unlisted companies has been reduced to 10 percent. The KSE welcomed this measured as it was its long overdue demand.

Sugar Industry: The other important incentive was restoring partly the exemption of excise duty, which had been removed retrospectively through the Finance Bill of 1989-90, would provide great relief to the sugar industry. According to new proposals, the production in excess of the output of the previous year will be exempt to the extent of 50 per cent; provided the mill has operated for the entire season. It may be recalled that prior to last year, the entire production of sugar in excess of the average output of the preceding two years was exempt from the payment of excise duty.

Pakistan has been incurring heavy expenditure on the import of sugar. The government has only recently, decided to import sugar to the tune of 300,000 tons. The annual consumption of sugar in the country is currently estimated to be around 2.1 million tons. Against this, domestic production was nearly 1.9 million tonnes last year. In the past five years, sugar production has maintained a growth rate of 11.4 per cent on an annual average basis. Another good news for the sugar sector is a 3-year tax holiday for beet sugar.

B.M.R: Another encouraging measure is the tax credit at the rate of 15% of the amount invested by a Pakistani company in the purchase of plant and machinery installed between 1st July 1990 and the 30th June 1993 for BMR. This facility was withdrawn last year. This will enable the industrial units to improve their efficiency. Tax credit of 15 % should have been restored from July 1988 so as to avoid hardship to those who already invested last year.

Electronic Industry: The electronic industry got an incentive in the import of parts and components. The parts will be exempted from customs duty and sales tax. The industry will also get concessions on the raw material imports. This concession will be available to all domestic appliances including blenders, electric shavers, room heater's hair dryers, cassette players and similar other items. The customs duty of 40% on raw material of these items has been refixed at 20% duty with 12.5 per cent sales tax. Similarly manufacturers of recognized TV sets will get concession in the customs duty. Customs duty on these parts has been reduced from 25% to 20%. However a sales tax of 12.5 per cent has been imposed payable at the manufacturing stage.


As a disincentive, the enlargement of limit from Rs. 50 million to 150 million under Monopolies Control Act by which the companies were required to go public would not be an effective measure. It would hinder the process of inducing the companies to go public and get listed at the stock markets. This limit is not only needed to be brought back to its previous level of Rs. 50 million but the need for simultaneous administrative measure was also felt to force more private sector companies to go public and create greater public participation.

Tax on Dividend Income

In wake of privatisation policy, It is not desirable to discourage investment in NIT, ICP, Bank PLS deposits and shares of listed companies. It is unfortunate that the budget has lowered the limit of tax exemption on profit of these sources from Rs. 15,000 to Rs. 10,000. Last year a tax of 7.5 per cent was imposed on dividend income. The government would realise a paltry sum of Rs. 8 million from this measure. It is likely to discourage listing of companies and widen participation of general public in their ownership. Tax on dividend income amounts to double taxation on the same income. Moreover, 2.5 per cent zakat is also being levied on the dividend. The KSE urged that dividend income in the hands of share holders of companies private or public be totally exempted from income tax. Zakat should also be made voluntary as they have made in case of disinvestment of PIA shares.

Textile Industry

The textile shares are facing pruning in view of heavy duty imposed by the budget. It is estimated that the smallest unit comprising of 14,500 spindles will have to pay from Rs. 8 to Rs. 10 million in the shape of excise duty (increased by 100 per cent). It will have the accumulative effect of impairing a large number of units beyond reprieve and ultimately ousting them from the international market. The APTMA urged for immediate withdrawal of the additional excise duty of Rs. 2 per kg.


P.I.A.: Against the public offer of Rs. 274,352 million the subscription received was Rs. 872.92 million showing three times higher response. The subscription break-up was as follows:
 (Rs. in million)
 Shares Subscription
 Offered Received
Offered in Pakistan 191.482 737.978

Offered to Non-

Resident Pakistanis 54.870 127.906

Central Cotton Mills: The Board of Directors of the company has announced bonus and right shares in the ration of 1:5 and 1:3 respectively subject to official approval. Right shares are offered at a premium of Rs. 5.00 each subject to the approval of CCI. It did not declare any cash dividend for the year ended September 30, 1989. AGM on May 31, book closure from May 28 to June 2.

Adamjee Insurance: The Board of Directors of the company has announced final dividend at the rate of 30 per cent plus bonus shares of 10 per cent for the year ended December 31, 1989. AGM on June 28, book closure from June 18 to 28.

Eastern Federal Union: EFU declared 100 per cent bonus shares and 10 per cent cash dividend. The authorised capital has also been proposed to be increased from Rs. 25 million to Rs. 100 million.

Pakistan Synthetic Limited: Against an offer of Rs. 163.400 million the company received a total of Rs. 184.871 million in subscription. NIT and Asian Finance & Investment Corporation subscribed to the entire amount of Rs. 37.360 million and Rs. 81.70 million respectively.

Highnoon Laboratories: One of the youngest pharmaceutical companies, established in 1984 and now a public company with paid capital of Rs. 17 million, according to latest survey by Information Medical Statistics (IMS) of Switzerland has achieved the top most status by achieving the highest sales among the national companies and now ranks 25th among the top 100 pharmaceutical companies of Pakistan including the multinationals.

Noon Pakistan: The Directors of the company have declared cash dividend at the rate of 30 per cent for the year ended December 31, 1989. AGM on June 30, book closure from June 27 to 30.

Nakshbandi Industries: The company has received official consent for its right issue in the ratio of 1:4 at a premium of Rs. 6.00 per share. Book closure from July 3 to 10.

WAPDA Bonds: An amount of over Rs. 4.4 billion had been subscribed to WPADA bonds (third issue) by the close of the business uptil June 21, surpassign the target for the third issue of WAPDA bonds was set at Rs. 3.9 billion. The present heavy subscription shows the confidence of the public corporations and financial institutions in the financial viability of WAPDA operations for the third year in a row.

Shabbir Tiles: The Board of Directors of the company has declared bonus shares in the rate of 1:8 (12-1/2 per cent) for the year ended December 31, 1989 AGM on June 28, book closure from June 13 to 28.
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Title Annotation:Pakistan
Author:Haidari, Iqbal
Publication:Economic Review
Date:Jul 1, 1990
Previous Article:France.
Next Article:World development report 1990.

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