Businessmen welcome cut in policy rates

LAHORE: Businessmen have welcomed the announcement of one percent decline in the policy rate, saying it would definitely reduce the cost of doing business.
They also expressed reservation and said it would still not compensate higher power and energy and transportation costs that are being industry faces.
All Pakistan Textile Mills Association Chairman S M Tanveer said the basic textile industries are designed to operate 24/7. These industries took loans from banks on 24 hours a day operations. When the government provides this industry only 14 hours of electricity and four hours of gas its operations are cut by 33 percent, he said.
“The bank markup in Pakistan is still very high and to add to the misery our idle capacities because of power shortages make the markup cost 33 percent higher,” Tanveer said.
He said the industry would benefit from one percent decline in the markup, if the government ensures 24 hours power supply at reasonable rates. The government should exert its writ by forcing the transporters to reduce goods transportation rates in line with the massive decline in the rates of the petroleum products, he said.
Similarly, he said, the government should reduce the power tariff also, as the cost of furnace oil has declined substantially.
Economic prudence demands that instead of recovering its past losses this benefit is passed on to the consumers to trigger industrial growth, he said.
Leading chemical producer Mian Anjum Nisar said the central bank should have reduced the markup by 1.5 percent instead of one percent.
The manufacturing sector, particularly in Punjab, is under severe distress and needs all the government facilitations to resume its growth path.
The economic managers of the country should move around in the market where they would see many reputable manufacturing facilities up for sales, he said.
Nisar said no one has the courage to go for green projects because of the energy and power crisis and inability of the government to properly regulate the economy.
Despite appreciable decline in inflation, the rates of many inputs are still high, including transportation cost, he added.
LPG Producers Association Chairman Farooq Iftikhar said the reduction of one percent in the policy rates is not a big deal. Inflation in Pakistan is lower than India, he said, adding, still even after one percent decline in the policy rates the comparative rates in India are 7.75 percent, which is 1.25 percent lower than in Pakistan.
The Reserve Bank of India is all set to reduce its policy rates on January 28, which would further widen the interest gap between India and Pakistan, he said.
Iftikhar said the average inflation in Pakistan during November-January period is expected to be four percent, while the policy rate is eight percent. He questioned the logic of keeping interests rates so high.
Pakistan Association of Auto Parts and Accessories Manufacturers former chairman Syed Nabeel Hashmi said slow reduction in the policy rates would keep the industries under pressure.
When inflation was ballooning there was some justification for higher policy rates; however, when inflation is completely tamed and reached the levels seen in 2003/04, there is no logic in keeping the interest rates so high, he said.
Hashmi said since inflation is further declining investors would hold their investments, he said, adding, Pakistan needs accelerated industrial activity to create jobs, which would be possible only if the cost of borrowing is in line with the regional economies.
The reluctance of the central bank to appreciably reduce its policy rates have nullified the decision of the federal government to continue passing on the benefits of lower oil prices to the consumers that has effectively reduced inflation.