Textile firms using political clout to get about Rs15bn?
ISLAMABAD: The mighty over two dozen textile firms are reportedly still using their personal clout to get about Rs 15 billion from the government, despite the fact Commerce Advisor has taken public position, well informed sources told Business Recorder.
The firms, sources said, asked the Ministry of Commerce which also deals with textile sector to send a summary to the Economic Coordination Committee of the Cabinet as they have convinced Prime Minister’s Advisor on Finance and Revenue, Dr. Abdul Hafeez Shaikh for compensation.
On April 1, 2020, Prime Minister Advisor on Commerce, Industries and Production and Investment, Abdul Razak Dawood stated that a few firms made a commercial decision to take risk and sold forward US dollars. They are now asking government to cover their losses of Rs 15 billion. However, he felt this is not fair as it was a business decision which did not work out. It was also discussed at highest level and his views were supported. It has therefore been decided that the government will not compensate these firms from taxpayers’ money.
An official told this scribe that the firms took independent decisions with respect to hedging of dollar when they felt that the price of dollar is on the decline. However, when dollar’s value rebounded they approached the government for compensation.
The official was of the view that if the government accepts the demand of over a two dozen firms, it will be a crime.
Meanwhile, All Pakistan Textile Mills Association (APTMA) has also distanced itself from these firms, saying that the Association does not support any compensation to “big boys” maintaining that in any case it will be unfair to other textile sector exporters.
Insiders further claim that over the last few months, exporters had sold forward dollars at approximately Rs 160. However, as orders are deferred or cancelled, those firms are receiving no dollars in sales to settle this forward. There was no harm if the dollar had remained at its value. However, the sudden upsurge in dollar value means that exporters have to pay the difference out of pocket as a loss.
However, firms argue that this is something they cannot afford in the given circumstances, and will likely be paying penalties or even default.
The firms, insiders claim, requested the government to reduce these losses for the textile export sector to stay afloat. Those firms also stated that they stood behind the GoP to minimise unemployment, but they need assistance to help bridge the loss.
The estimated losses will be approximately Rs 12 to 15 billion. The total forward booking is estimated to be about $ 3 billion. If this value is closed out today, the average difference on these bookings is about 3% which equals $ 90 million or approximately Rs 15 billion. The firms asked the Prime Minister Advisor on Commerce to use the reserve fund which has Rs 100 billion to cancel these contracts and to settle with the commercial banks as soon as possible.
Another official on condition of anonymity said that had the Commerce Advisor intended to support these groups, he would not have taken public position, adding that now he would not back out from this position, even if the firms get a nod from Finance Advisor.—MUSHTAQ GHUMMAN
