Govt refuses to bail out value-added sector

ISLAMABAD: The government has refused to bail out the value-added sector (VAS) seeking monetary compensation for the export orders it booked on the presumption that Pak Rupee would further depreciate against the US dollar, top officials of Commerce Ministry told to The News.

The government maintains that commercial decisions always have consequences that are to be borne by commercial entities and it’s not possible for the government to bail them out.

To seek compensation, some VAS representatives recently met Prime Minister’s Adviser on Commerce Textile and Investment Abdul Razak Dawood and top ministry officials. The VAS representatives sought the compensation, contending they did not book the rupees in advance as they usually do, presuming the rupee depreciation would continue. However, the unprecedented depreciation of the US dollar and appreciation of Pak Rupee from 165 to 152 has inflicted loss to the VAS exporters.

The officials also said that last year, the “big brothers” of the textile sector wrote a letter to the government to cover their losses as a consequence which the government very rightly refused to even consider. “And this year, because they did not book the currency, they have lost out because they will once again receive less rupees against the dollars,” the officials added.

In the meeting, the VAS representatives also complained about non-availability of yarn. The officials said that they have been told that not yarn availability but it’s price has been the bone of contention all along. The officials said the Economic Coordination Council has done away with the 5 per cent duty on import of yarn.

The officials said All Pakistan Textile Manufacturers Association (APTMA) has already refused to support the VAS demand for monetary compensation for the loss it sustained due to its commercial decisions and its stance on the availability of yarn.

The official said that according to APTMA, all-time high cotton prices in other countries resulted in increasing yarn prices. Currently Indian markets are temporarily having excess yarn due to COVID-19 as last year their exports fell significantly. “Indian merchants are therefore willing to sell their inventory at lower prices. They will obviously increase the prices once the inventory is exhausted.”

The cotton production in Pakistan has dropped to an all-time low that has caused demand-and-supply gap when the sector is operating at full capacity, pushing cotton prices to a record high. To bridge the gap, the country needs to import cotton.

Despite this scenario, the officials said, APTMA has never demanded the government allow import of cotton from India (due to the Kashmir issue) where the cotton price was lower due to government subsidy and lower freight cost. Freight costs have increased fourfold in the COVID period.

APTMA argues that since the import from India is not allowed, the policy on the acquisition of non-operational/sick/in-troubled units will address the yarn shortage by adding 1,000 tons per day or 30,000 tons per month due to the addition of 600,000 spindles to operational capacity.

“The policy on acquisition will also provide political capital as these mills were shut down and made non-operational during the tenure of last government due to their irrational policies. Moreover, it will also result in quick employment opportunities. The acquisition policy will, as a matter of rule, not involve any loan write off.”