Sugar industry, textile biggest defaulters of bank loansBusiness
KARACHI: Generally known for profit making, sugar sector has emerged with the biggest infection ratio of banking loans during the third quarter of the calendar year 2021.
The State Bank’s Statistical Bulletin for January 2022 revealed that the sugar sector’s infection ratio of loans rose to 29.1 per cent in 3Q2021. The infection ratio has been increasing in each quarter — from 16.37pc in the first quarter to 19.8pc in the second quarter of the same year.
For the last couple of years the sector remained in limelight due to massive increase in sugar prices — almost double — before they receded to below Rs100 per kg prevailing prices in domestic markets.
On March 25, 2021, The Federal Investigation Agency (FIA) detected Rs110 billion earnings by the sugar mafia during the last one year through ‘speculative pricing’.
It is believed that the sugar industry has been a profit making sector which is the reason that sugar production went up along with an increase in area under cultivation for sugarcane.
The Federal Committee on Agriculture (FCA) on Oct 7, 2021was informed that sugarcane production for 2021-22 was estimated at 87.67 million tonnes. However, Special Assistant to the Prime Minister on Agriculture Jamshed Iqbal Cheema claimed that sugarcane production would exceed 100m tonnes. The country needs about 6.2m tonnes sugar while early government estimates for production were at 7m tonnes.
It all shows that the sugar sector has been making huge profits but the infection ratio shows the sector does not like to return the loans of the banks.
The sugar sector advances during 3Q2021 reached a total of Rs202.2bn while the default amount was Rs58.9bn.
In terms of amount, the biggest defaulter was the textile sector — the most pampered industry which has been provided with a number of incentives to help increase exports.
The default amount of the textile sector was Rs158.4bn till 3Q2021. The infection ratio was 10.1pc. The infection ratio was lower due to the highest loans the sector got from the banks. The advances to the textile sector till 3Q2021 were Rs1,570.6bn.
The textile sector is considered as the backbone for the economy particularly for the exports as it earns around 60pc of the total exports. The SBP provides liquidity at the cheapest rate to the sector while the government helps the sector with other incentives. However, the huge default shows either the sector is in trouble or is getting extra benefits with defaults.
Among the sectors, agribusiness was the defaulter of Rs71.4bn with infection ratio of 8.6pc while the borrowed amount was Rs835.3bn.
Electronics was the second biggest defaulter in terms of infection ratio as it reached 17.8pc with Rs23.7bn defaulted amount while the borrowed amount was Rs133.7bn.
The agriculture sector was another major defaulter with an infection ratio of 16.7pc; amount defaulted Rs65.5bn while the total borrowing was Rs391.4bn.
Individuals also emerged as big defaulters with infection ratio of 6.4pc; the amount defaulted was Rs64bn while the advances for the individuals were Rs998bn.
Among the segments, Small and Medium Enterprises (SMEs) was the biggest defaulter with an infection ratio of 17.9pc. SMEs defaulted Rs77.1bn while the advances for this segment were Rs430.2bn at the end of 3Q2021.
Published in Dawn, January 12th, 2022