Mohsin Aziz Chairman All Pakistan Textile Mills Association (APTMA) while commenting on the report of the State Bank about non- performing loans (NPLs) said that the abnormal surge of more than 24 % increase in NPLs, from 494 bn to Rupees 629 bn, in just one year was alarming and disappointing.
In a statement issued on Thursday, he said the reasons for such an abnormal increase in NPLs were twofold: higher interest rates being the basic cause, and the second being the shortage of utilities supply that is basically gas to the industry. He said that because of these reasons the industry was not performing, which resulted in abnormal increase in the NPLs.
The Chairman APTMA was particularly concerned gravely over the impact of NPLs on the textile industry, which was already struggling for survival in the most unfavorable atmosphere prevailing in the country. He said, textile industry being capital and labour intensive was not performing well because of high interest rates.
The recent reduction of policy/ discount rate of just two percent was totally insufficient for investment, and viability of the projects and thus is resulting in NPL's. He said reduced gas supply to textile mills, in Punjab in particular where textile units are concentrated, had crippled this premier industry.
He lamented the fact that more than 120 days in the current year the textile mills in Punjab were either closed or running at very low capacity. Such sorry state of affairs, he emphasized, should not be allowed to continue as it would lead to a loss in the major export earnings from textiles and also would cause massive unemployment.
If the twin problems of high interest rate is not addressed and is not brought down to a single digit figure clubbed with control on power shortages to textile industry, not only the NPL's would grow at the same speed but would also result in stagnant or lower exports and also a very low growth rate of 2-2.5% which had peaked at 8.5% a few years ago which is the required rate for a developing country like ours.
He said the impact of such increase in NPLs on industry further damages the industries' image in the banking sector, as it restricts banks from extending further loans to the industry, in which BMR is essential to keep the product in line with the technologically advancing world requirement.
He therefore stressed upon the government, specially the state bank and all economic ministries to look into this state of affairs, very seriously as both, the reduction of interest rates and power shortages if not addressed urgently will have drastic irreversible consequences.
All Pakistan Textile Mills Association (APTMA)
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