Banks reluctant to enhance TCP's credit limit

RIZWAN BHATTI

KARACHI:  Despite the ministry of finance approval, banks are reluctant to enhance Trading Corporation of Pakistan (TCP) credit limit up to Rs 141 billion.

Sources told Business Recorder that a few months back, owing to active role of TCP regarding urea import and sugar procurement from domestic mills, the ministry of finance decided to enhance the credit limit of the state-run grain trader - TCP - for smooth commodity operation.

In this regard, the consortium of six banks, which regularly provides financing to TCP, were asked to enhance the corporation's limit by Rs 31 billion for smooth commodity operations. Currently, TCP's credit limit stands Rs 110 billion and the ministry of finance has requested banks to extend it up to Rs 141 billion.

However, the consortium of six banks is reluctant to increase the credit limit due to unknown reasons and despite ministry of finance approval and government guarantee, credit limit of the state-run grain trader still stands at Rs 110 billion, out of which a major portion has already been consumed by the corporation for import of urea and procurement of sugar.

They said that banks have not increased credit limit, hence TCP may face some financial problems, if federal government issued new directives for further procurement of sugar from domestic mills. Sources said banks don't want to enhance their exposure in commodity financing, therefore they (banks) are reluctant to enhance TCP's credit limit as well.

The banking industry has some Rs 400 billion exposure in the commodity financing and besides TCP some four provincial food departments and Pakistan Storage and Service Corporation is also conducting commodity operation in domestic market.

TCP's billions of rupees payments are pending with Utility Stores Corporation, ministry of finance and National Fertilizer Marketing Limited. If these receivables get matured there is no need for enhanced credit limit, they added.

Sources in TCP also confirmed that despite ministry of finance approval their credit limit has not increased by the banks, however they are confident that banks will facilitate the corporation, when over the limit financing will be required.

Although, banks have not increased our credit limit. They have assured us of full cooperation in case of additional financing requirement. It seems that consortium of banks doesn't want to bound itself under new limit, they added.

"Current credit limit is sufficient for TCP and under this limit it has successfully completed urea import and sugar procurement operation. Under the urea import task the corporation imported about 1.2 million tons of urea and procured 0.378 million tons of sugar from domestic sugar mills," they said.

They said TCP's financial condition is much strengthened and despite active role in the commodity operation, current credit limit of Rs 110 billion has not been fully utilized. However in case of further procurement of sugar, which is still on the cards, the corporation will require an additional amount to pay to the sugar mills, they added.

Six banks consortium is providing financing to TCP on a regular basis. The government lacks funds to conduct commodity operation from its own resources. National Bank of Pakistan, United Bank Limited, Allied Bank Limited, MCB Bank, Habib bank Limited and Standard Chartered Bank are the part of the consortium for TCP financing.