950825

Business diary

from Lahore

SAQLAIN IMAM

The recent crack down on the sugar mills and dealers carried out by the Federal Investigation Agency (FIA) has sent a wave of shock of a mixed nature across the country. Some people are happy that finally the government has risen to perform its duty, although the FIA still cannot be praised for its dubious role in the sugar scam. On the other hand some believe that the raids would further bewilder the situation for common consumers as the prices would skyrocket in the days to come. Not surprisingly, the sugar hoarders, dealers and mills owners have jointly condemned the FIA raids.

Whether or not a sugar mill owner or dealer is involved in the scam, he has been forced to face the humiliation at the hands of FIA officials who are known for their rich life style that they cannot maintain if they live within their legitimate source of income. The sugar dealers and mills owners' friends in media, government, and other opinion making sectors have 'lashed-out' at the raids saying that the raids would unleash a spiral of price hike that would adversely affect the consumers.

The government now appears to have been caught up in its own trap laid by 'bureaucrats and the FIA officials.' The import of sugar seems a solution to the growing crisis of sugar. But the fact is that the imported sugar would cost a consumer more than Rs 17 kg.

After the raids, some sugar mills owners had gone to the extent of threatening to close their mills which of course they did not do as this step would have impressed any one the least. However, some mills owners said that one of the effects of the raids was that instead of coming down, the sugar price went up to Rs 17 or more increasing by Rs 2 or so. Is it good a logic!

Some of the arguments of the sugar mills owners have some sense, but hoarding cannot be justified, and that too with the purpose of creating shortage and thus causing an increase in the price. The increase in the cost of inputs have made no choice for the sugar producers but to increase its price. The delay in granting permission to export sugar also put the sugar producers in an imbroglio last year. The constant increase in the prices of electricity is also a significant factor that overburdens the sugar producers with bills. But the latest increase in the electricity tariff should not affect the price of sugar that was manufactured much before this increase.

According to some suggar dealers, the current problem of increase of sugar price is the result of the wrong calculations made by the government officers about the quantity of sugar production last year. They had calculated a surplus production, and some mills owners had also made a hue and cry about the surplus production. Thus they demanded a liberalized export policy for sugar. The government allowed some cronies to export about 300,000 tons sugar while none of the government officers considered the smuggling factor.

Although there is no reliable data available regarding the smuggling of sugar, the tradition of smuggling establishes the fact over 400,000 tons sugar must have been sent across the borders to Iran, Afghanistan and India this season. The FIA's anti-smuggling wing never checked 'the smuggling' which was its primary duty. But now the FIA's anti-smuggling wing is raiding the sugar mills inside the country. This fact is sufficient to prove the bogus 'karvai' of the FIA.

The mills owners have warned that the raids would not solve the crisis. They have predicted that sugar prices could go beyond Rs 20 next year. They complain of the increasing cost of inputs. However, it is yet to be ascertained whether the input cost has exceeded the previous market price of sugar. Sugar industry is one of those lucrative sectors which could pay off loans within five years of starting production. Therefore, how one can justify hoarding to make 'additional' profits.

People engaged in sugar trade know that a future trade of sugar has always been going on. Some traders buy sugar bags today or some token money which are likely to be supplied/produced after two months, three or more. This is the basis of speculative trading and also the hoarding. The profits spun through this speculative trading do not reach the production side to cover the input costs. Such a trading, however, is considered as a normal activity among traders. But should it be allowed to continue! This question is begging for an answer. Since profit making is believed to be the sole factor that makes people indulge in business, therefore, some consider that there should not be any restriction on this desire even if profit is made at the cost of a productive activity that gives an opportunity to make the profit!

TRADERS' STRIKE

Some traders of the city staged a hunger strike this week to press the government accept their demand for withdrawal of certain amendments in the return form of income tax. They also brought out a procession this week to press for the immediate withdrawal of the restrcitions imposed by the income tax form 'A'.

The unpalatable amendments in the new return form are not new altogether. Informations regarding the expenditures on schooling of children and health care are furnished by citizens in developed countries. However, these practices are new in Pakistan. Therefore, there is a backlash to such a move. There will be a backlash to every move which is new, because our business community continues to tread the old path. But it is no longer possible in the changing conditions. All informations about business activities are being documented, thus, all expenditures will also have to be brought on record.

Here the fear lies: A community addicted to thrive on extra-legal methods of business, income and expenditure is bound to resist any move of documentation. The tax collectors and policy makers should also realize this fact and must avoid bashing the business community if it is reluctant to accept any major change. The traders' demand for exemption of wealth tax for a shop and a residential house does not seem to be very illogical.

PECO'S LIQUIDATION

The Badami Bagh Works of the Pakistan Engineering Company in the provincial metropolis was auctioned out this week. The Privatization Commission dismembered a great engineering unit into nine packages of plant/machinery and five parcels of lands. The auction promised 40 percent only of thetotal sum of the highest bids of all packages and parcels, i.e. Rs 234.375 million. Only real estate (land) of the engineering unit fetched about Rs 210 million, the rest of the money would come from the auction of plant/machinery! This method of privatization in which the engineering unit has been divided will never return to produce any significant engineering item. Once this mega unit used to manufacture engineering goods for WAPDA, Pakistan Railways, and burgeoning textile mills. The Privatization Commission is bent upon liquidating it instead of privatizing it. Does the PC has a mandate to dismember, liquidate and destroy an engineering industry in the name of privatization? The PC plans to liquidate two national dailies in the same manner in the name of privatization.

WAPDA

Water and Power Authority did a commendable job as they announced that their recovery drive had yielded Rs. 63 billion till last month. It is a singificant improvement in their efforts to revover the oustanding bills from different types of consumers. But not only due to their drive for recovery, but also due to some other factors, the industrial sector has reduced the amount of power consumption. Common consumers have also cut down their routine consumption level as the cost of electricity has now started squeezing the wallet of the people of the middle income group who in fact are now bearing the brunt.

LCCI

The situation is further grim as the Senior Vice President of the Lahore Chamber of Commerce and Industry, Sheikh Waheed-ud-Deen pointed out that about 3825 factories have so far been shut down across the country. If he is right then how did we increase the monetized size of our exports this year.

LSE

A monotonous activity was obversed at the trading halls of the Lahore Stock Exchange, Dr. Yasir Mahmood of the LSE, once again optimistic, said the open market move has started paying dividends. He said the benefits of the open market move could be seen from this fact that since 1991, when the decision of openness was taken, that foreign investment of about Rs. 30,000 to Rs. 35,000 million has already appeared in the Pakistani capital market.

STEEL DEALERS

Steel dealers have been compelled to seek government's interference in order to ensure a fair treatment to them by the Pakistan Steel Mills. They have complained that steel was available in the market but at exorbitant rates because the PSM do not supply steel to its dealers. A representative of the Anjuman-e-Tajiran Pakistan, Punjab Group, said that the steel products which have an official value of Rs. 30,000 per ton, are sold at Rs. 42,000 in the open market in Karachi. He pointed out that the steel from the PSM is supplied to those only who can obtain a quota from the government. And the quota is issued on the basis of some political connection. Lahore is facing a worst situation where steel industry is already at the verge of collapse. The Minister of Production the can help the steel dealer in the Punjab by issuing quota to deserving steel dealers and not on the basis of some political connections. The minister belongs to the PML(J).

CORRUPTION

Senator Malik Mohammad Qasim has announced that some changes in the banking rules are likely to be notified by the Federal Finance Ministry which will give the Federal Anti-Corruption Committee power to draw out any information from any bank regarding any account about which the FACC is convinced that these informations are necessary to probe into a case of corruption, Malik Qasim who is Chairman of the FACC, seems to be a lone crusader against corruption and in the political milleu of present day Pakistan it seems that his crusade will never bear fruits. Due to his relentless struggle to fight against corruption, his frinds have started dubbing him the Shevardznadze of Pakistan. Sheverdznadze reached to the zenith of his political career in Georgia before he was appointed Foreign Minister of the former USSR.

PRIDE OF PERFFORMANCE FOR ORANLU

Some isolated busuiness circles think that why a businssman or an industriallist could not be awarded a Presidential Pride of Performance for the services he/she renders to the community by creating job opportunities, paying taxes or increasing exports thus earning foreign exchange reserves for the state kitty? Why people in the corridors of power cannot see the people who cause the blood to travel through the veins? Why such dedicated businessmen are not prominently listed in the Pride of Performane recipients. Why Javaid Tariq of the Highnoon cannot find a place in this list for the production of Peptilose ORS (Oranlu)? Various internationally reputed paediatricians such as Dr. Alan Meyers of Boston City Hospital, Camille Saad, Pritech-A USAID Finance Project, Dr. Wandee Varavithya of Mahidol University, Bangkok, Prof. Ibrahim M. Fayad of Cario University Children Hospital etc along with WHO, have unanimously acknowledged Omalu as ORS and Peptilose as a base for diarrhoeal food preparations and prescribe as a dire need for the children of the world. Whey an entrepreneur is not considered as worthly of Pride of Performance?

Ch. Muhammad Hussain, Managing Director of the Service Industry and father of Federal Commerce Minister, Ahmad Mukhtar breathed his last on Tuesday right at the Punjab Institute of Cardiology. The octogenarian businessmen enjoyed high esteem in the business community for his honesty and fairness in is conduct. He not only contributed in the building of the national industrial sector, but also patronized men of letter and intallectuals. He was a firm believer in fairness in business ethics and left the mortal world with a clean record. May he rest in peace.