LAHORE: There are many rent seeking sectors in Pakistan that pass on their inefficiencies to public exchequer when in distress and fleece the public in times of shortages.
They include car makers, manmade fibre producers, sugar mills, and cement manufacturers. All these manufacturers want protection from imports that they always get and press the government to subsidise their exports. An interesting point in this regard is that most of these sectors are minting money.
They do not want competition. The car industry in Pakistan is dominated by three Japanese brands and has successfully blocked intrusion of car makers from other countries. Still it is operating on huge protective duties.
Although all the three car producers are amongst ten largest producers, they do not introduce the latest technologies in Pakistan-made vehicles. They were forced to introduce some gadgets in their models when consumers start preferring used cars loaded with modern navigation and safety equipment.
They have been operating on high duty protection for almost three decades and have still not achieved the efficiencies required to compete with new imported vehicles if the protective duties are reduced to normal 10 percent.
Manmade fibre manufacturers have been operating on duty protection for almost two decades. The protection is usually granted to an industry for a period of five years, after which it should be able to attain enough efficiencies to counter imports.
The manmade fibres were provided sovereign guarantee of duty protection for ten years. Polyester fibre is the basic raw material used in over 70 percent of the textile products globally.
Textile millers in Pakistan are unable to compete globally in products made from polyester fibre because they get this raw material at much higher than global rates.
It is worth noting that these manmade fibre producers have increased their capacities substantially without attaining global level efficiencies.
They could afford to do that because of the protections they enjoy on imports. Sugar millers belong to the most influential segment of the society. Overwhelming majority of sugar mill owners belong to strong political families and have almost equal presence in ruling elite and opposition.
These politicians may have irresolvable political differences but when it comes to supporting the sugar mills they are on the same page. They take full advantage of their influence, exploiting the farmers and the exchequer and violating laws daringly.
The law of the land says that the crushing of sugar should start from October 1 in Sindh and October 15 in Punjab. They openly violate this law and wait until end November or December.
The water content in the sugarcane reduces in winter and the sugar content increases. They thus exploit the farmers by paying them on reduced weight and high sugar. Another round of exploitation starts when the payment of the crop is unduly delayed.
The law binds the mills to clear the farmers’ dues within 15 days of procurement or face harsh penalties. The sugar mills daringly ask government for support to clear farmers’ dues almost six months after procurement.
Sometimes they ask the government to lift some of their unsold stocks through Trading Corporation of Pakistan or demand huge subsidy for exporting sugar.
Otherwise they warn that farmers’ payment would not be cleared. Pakistan’s currency has devalued by almost 45 percent since 2008 and still the sugar mills have not attained
the efficiency to compete globally.
The government has up till now resisted their demand for export subsidy. Let us hope that it adheres to this policy. Cement sector was heavily fined by the Competition Commission of Pakistan (CCP) for cartelisation almost a decade back.
An appeal by the cement manufacturers questioning the competence of the Competition Commission of Pakistan to regulate the sector is pending in courts.
Cement capacities have since then have almost doubled. The same 23-24 cement mills have expanded capacities. This sector also wants government subsidy for exports and duty protection from imports. One wonders that if the survival of the sector depends on government subsidies and protection then how come these same mills are expanding their capacities.