High spread on pretext of inflation: textile industry criticises banks

The textile industry has criticised banks for a very high spread of 8 percent between lending and borrowing on the pretext of inflation. The industry circles have pointed out that the textile industry cannot survive by paying heavy mark up, according to him, banks are paying 6 percent to the depositor and charging 14 percent from the borrower, enjoying a spread of 8 percent and the government is not forcing the banking industry to reduce mark up under the fear of increase in inflation.
It may be noted that the textile industry has sought 5 percent refund against over Rs 400 billion outstanding loans as on 30th June 2011 to check negative impact of steep fall in cotton prices internationally ahead of procuring domestic cotton. Out of the total working capital of over Rs 400 billion, the short and long-term loans consist of Rs 338 billion and Rs 91 billion respectively.
However, the Pakistan Readymade Garments Manufacturers and Exporters Association (PRGMEA) has objected by stating that Aptma was misstating the facts, as it is not whole textile value chain but only basic textile facing default on banking loans. But the textile industry sources pointed out that PRGMEA has no idea of situation on ground, therefore, it is all non-sense on the part of PRGMEA leadership when it says that Aptma has misstated the facts.
According to the industry sources, out of textile industry outstanding loans as on 30th June 2011, total loans are of Rs 600 billion with Rs 400 billion of spinning, weaving and finishing and only Rs 200 billion of garments sector. They said the Aptma has asked for 5 percent refund on Rs 400 billion loans, as it was not facilitated with Export Refinance Fund, Duty Drawback of Local Taxes and Levies (DLTL) Scheme, rebate, customs drawback and sales tax refunds like the apparel industry.
Also, the industry circles pointed out that 100 percent of organised woven fabric and 70 percent of finished processed fabric is manufactured by the Aptma members directly, contributing more than $7 billion to the textile industry's total exports of $14 billion. Indirectly, they added, all basic raw materials are provided to the garment industry by the spinning, weaving and finishing industries, as not a single dollar finished fabric is being imported by the value added sector for export.
Textile industry circles said a spread of 8 percent on lending and borrowing sides is unfair therefore the textile industry has asked for 5 percent refund of Rs 400 billion outstanding loans as on 30th June 2011. They said the government has let the banks to earn such a huge profit at the cost of industry on the pretext that inflation would be uncontrollable in case interest rate comes down from the prevailing level. Aptma has been opposing the scheme of things and has finally come up with a proposal of 5 percent refund on outstanding loans, which is a genuine demand, they added.
According to these circles, Aptma's pursuance for price transfer through free market mechanism has resulted into record exports of $14 billion during 2011-12. They said India is also following Aptma's vision of free market mechanism today, which again speaks volumes about Aptma vision for industrial growth in the country.