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Problems of industry.

Problems of Industry

Woollen Industry

Chairman, Pakistan Woollen Mills Association (PWMA) Mian Muzaffar Ali has said that all the woollen mills producing acrylic yarn for the weaving industry would be closed down gradually if steps were not taken to ensure their regular functioning. The units set up at Gadoon would be of no use for the weaving industry as they did not produce yarn but only converted tow into top which still required a lot of processing for conversion into yarn for use by weaving mills, he said.

He said that two of the mills employing about 1500 persons had already suspended production as the managements cannot compete with the Gadoon units enjoying Customs Duty exemption. On the other hand all the nine tow-to-top conversion units at Gadoon provided employment to not more than 30 persons, although helped the owners save Rs. 1.3 million a day in the form of Customs Duty, he added.

He said more and more entrepreneurs are going for installation of tow-to-top converters at Gadoon duty to fabulous amount of savings in Customs Duty which enable them to recover their investment within a week after the converters go into operations. The converters, he said, on the other hand, make no value addition to the acrylic tow which has to pass through about 10 machines for turning into yarn and tow-to-top converters is the first among these machines.

He said the Sarhad Development Authority has sanctioned or issued no objection certificates for the installation of more than 20 acrylic tow-to-top converters at the Gadoon Amazai Industrial Estate during the past two years. As such the country is importing 12,000 to 15,000 tonnes acrylic tow-tops annually for meeting the requirements of the woollen mills.

About a dozen tow-to-top conversion units in woollen mills outside Gadoon are processing 7000 tonnes of acryclic fibre annually, while another nine have started operating at Gadoon during the past two years and about a dozen still await installation, he observed.

He said the acryclic tow conversion capacity at Gadoon will reach 80 tons per day or over 24,000 tons per annum it only 20 tow-to-top units go into operation exceeding the requirements of the country. He further said there is a mad rush for installation of these units at Gadoon because imports of acryclic tow is exempted from Customs Duty of Rs. 40,000 per ton. Mostly old units are being installed at the place. An old unit costs Rs. 400,000 to Rs. 500,000 which process about four tons of acrylic tow in a day, he pointed out.

Carpet Industry

Pakistan Carpet Manufacturers and Exporters Association has vowed to increase carpet exports by about Rs. 100 crore provided the Government extends its patronage to the industry. Yacoob H. Salehji, Chairman of the association, in a Press statement said the carpet industry is neglected while the exports continue to suffer.

He said it is a self-oriented industry, but now losing ground because of poor incentive at home. Salehji said over 1.5 million people were engaged in the hand-knotted carpet industry and about 80 per cent of the cost goes to labour. Pakistan's ancillary, he said, not only failed to explore the export potential available in the USA, Europe, Far East and the Middle East but also faced with a tough competition internationally. The industry should be given income tax exemption and PCMEA chairman adding that neighbouring India not only allowed tax exemption but also extended, subsidy, in the form of rebate upto 28 per cent on f.o.b. value. The Indian carpets are 25 per cent cheaper internationally while the Indian labour was also cheaper by 40 per cent, he added. Salehji said secondly there had been a hike of 46 per cent during the last 12 months in air freight rates, resultantly carpets cost nine per cent more. The Indians were extending 50 per cent relief in air freights, he added.

He said the bottlenecks affected the exports of Pakistani carpets while the carpets from Iran, China and India cost 30.40 and 50 per cent less. Salehji demanded that the turnover requirements of 2.4 times should also be lowered to two times as it would be in line with the loan period of 180 days. He suggested that the mark-up rate on refinance should be reduced from seven to three per cent so that the cost of production could be reduced.

Towel Industry

Pakistan earned Rs. 2.747 billion through export of 32.081 million k.g. towels during the last fiscal year (1989-90). According to annual report of Towel Manufacturers' Association Pakistan (TMAP), the export of towels during 1989-90 showed a mild increase of 1.5 per cent in terms of Pakistani rupees, whereas a decline of about 7.6 per cent in terms of US dollar as compared to the previous year. During the year 1988-89 Pakistan earned Rs. 2.707 billion from export of towels. The value of export in terms of US dollars in that year was 140.44 million dollars whereas in the year 1989-90 this value decreased to 129.82 million dollars. In terms of quantity the statistics show a decline of 6.6 per cent. Pakistan exported 32081 metric tons of towel in 1989-90 and 34,345 metric tons during the fiscal year 1988-89.

The average unit price of towels shows an increase of 8.62 per cent per kg. in terms of Pakistani rupees and a decline of 1.0 per cent per kg. in terms of US dollars. The unit price in 1989-90 was Rs. 85.62 per kg or 4.05 dollar and in the fiscal year 1988-89 this price was Rs. 78.82 or dollar 4.09 per kg. The share of towels in total exports of cotton and cotton-made products, in terms of US dollars was decline to 4.36 per cent and 2.62 per cent respectively. This share was 4.82 per cent and 3.01 per cent respectively during the fiscal year 1988-89.

Tyre Manufacturing

Pakistan's 54 per cent capacity of tyre manufacturing is under-utilized because of smuggling of nearly 0.4 million sets per annum and another 0.2 million sets coming into the country free of duty |labelled' as scrap rubber and an equal quantity of tractor tyres being imported duty free. Against a national demand of 2.2 million there exists a capacity of 2.5 million tyres and the production is 1.04 million per annum. According to Tyre Manufacturers Group, 10 per cent exemption of Excise Duty will enable the local industry increase its capacity utilization by competing with smuggled tyres.

The group in its proposal to the Resources Mobilisation and Tax Reforms Commission has stated that higher capacity utilization would not only meet the national demand adequately, but would be able to contribute Rs. 721 million additional revenue per annum as this amount at the moment is being lost by the government because of nearly 0.8 million tyre sets per annum are either being smuggled or imported duty free by |labelling' new tyres as scrap rubber of declaring them as tractor tyres. The group states that certain fiscal measures would improve upon the present situation; and if at least half of the quantity presently being brought into the country, officially under different titles and unofficially, could be produced locally and other half legally imported the government can generate the stated additional income over and above Rs. 722 million which tyre industry/trade is generating today.

The fiscal proposals include: Exemption of 10 per cent Excise Duty on local production; fixation of ITP of tractor tyres and imposition of the same rate of duty as applicable on ather tyres; imposition of current rate of duty on rubber scrap and fixation of its ITP at the same level as that of new tyres.

Ghee Industry

The vanaspati ghee industry has an annual export potential of 300,000 tonnes of ghee and cooking oit to recover 80 per cent of foreign exchange now being spent on the import of edible oil. Pakistan is presently spending approximately dollar 600 millions per annum on the import of edible oil. The potential of ghee industry was highlighted by the Chairman of Pakistan Vanaspati Manufacturers Association (PVMA) Mehmood Ali Bhatti at a Press conference.

He said that the opportunity to export ghee had arisen due to one reason that our dependence on PL-488 (US aid package) has ended last year. This would prove great blessing to our economy, he added. He said under the US aid package we were not permitted to export the products of edible oil, which was totally against national interests yet we have made astonishing development in the ghee manufacturing technology which has helped in catapulting our stalled production capacity from one million tonnes to more than two million tonnes. This is how we can recover our loss of foreign exchange, he added. He told newsmen that the PVMA had already sent a comprehensive plan to the government for utilisation of the available export potential of the industry. He claimed that if the time-consuming bureaucratic modalities are simplified the industry was ready to go ahead with almost no loss of time.

Dealing with the issue of spiralling prices of ghee and cooking oil, Bhatti said it was, mainly due to unrealistic duty structure. Elaborating his point, he said that the import duty on RBD palm oil was being charged at the rate of Rs. 4500.00 per tonne and on the prices including the duty 26 per cent surcharge was an added burden on cost of production which goes as high as Rs. 308.00 per 16 kg. container. Whereas, the GCP was selling the same at Rs. 283.00. Bhatti pointed out that the GCP sill remains the powerful competitor in the market which the private sector was unable to bear. Resultantly, most of the units of the private sector had been knocked out of production, causing shortage of ghee in the market.

Pakistan Steel Mill

Pakistan Steel will have a record sale of Rs. 110 crore this month but still there will be a loss of Rs. 58 crore accumulated from the past. This was stated by Chairman Pakistan Steel Lt. Gen. Shujaat Ali Bukhari at a luncheon meeting at the Karachi Chamber of Commerce and Industry, while outlining plans for expansion and the current efforts to achieve maximum production capacity which is at present 97 per cent. Presenting their problems, that come across in dealing with Pakistan Steel, the businessmen complained about high prices and low quality steel products. The Chamber members complained that the mill management has quietly raised the prices of billets by Rs. 700 per ton and is not refunding the amount collected as 12-1/2 percent Sales Tax withdrawn under a court order. They also maintained that the management of Pakistan Steel never bothered to acknowledge letters sent by its clients.

The Pakistan Steel chief apologised to the Chamber members on behalf of the marketing department which does not reply to the letters. He, however, failed to provide a satisfactory answer on complaints of increase in prices of billets and the refund of sales tax, although a businessman had informed the Chairman that he was waiting for his refund since 1986. Lt. Gen. Bukhari said that the Government has given the consent to increase the production capacity of the mills from the existing 1.1 million tons to 1.5 million tons in the next two years and to 3 million tonne by 1997. He said that according to a study conducted by a foreign consultant, the national steel requirement, which is presently 2.5 million tonnes, will go up to 4 million tonnes by 1995. The target can not be met even with coming into production the three other proposed steel mills. The People's Steel Mills which remained closed for 9-1/2 years is being renovated to produce 6,000 tonnes of steel alloy annually in the next three years. It will also fulfill the defence requirments. He said that Pakistan Steel suffered a loss of Rs. 130 crore in 1986 while it earned a profit of Rs. 5.7 crore in 1989-90 first time in the history of the mills. As a result of an unwise decision of the previous government the organisation incurred a loss of 105 crore.

In reply to a question Lt. Gen. Bukhari said that the pig iron is the only product whose price has been increased by Rs. 500 per ton since July this year. Quality of products is satisfactory and will further improve with the increase in production. Efforts are being made to raise the pig iron production from June this year to eliminate the shortage. In reply to another question the Pakistan Steel chief said the total cost of the mills is Rs. 29.2 billion while the cost of expansion, which is Rs. 2 billion, will be met from mills own resources.

He said that there are 23,000 employees in the mills as against an actual requirement of about 15,000. This trained manpower can be utilised by the downstream industries while some of them will be absorbed in the expanded mills. The mills is keen to privatise many services including the transport section which has 2,000 drivers. He refused to concede to the demand of shifting the marketing department of the mills to the Trade and Finance Centre for the convenience of the businessmen who faced problem in reaching the mills due to the bad law and order situation.

Welcoming the guest, President of the Karachi Chamber of Commerce and Industry Riaz Ahmed Tata urged Pakistan Steel, which is the largest industrial organization, to play a positive role in the development of industry. He asked the Steel Mills management to treat the members of the Chamber politely and respectfully, as they are their clients.
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Title Annotation:Pakistan; Industry
Publication:Economic Review
Date:Jun 1, 1991
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