The sugar industry, the most defaulting textile of bank loans – Business

KARACHI: Generally known for its profits, the sugar sector emerged with the highest bank loan infection rate during the third quarter of calendar year 2021.

The State Bank’s statistical bulletin for January 2022 revealed that the infection rate for sugar sector loans rose to 29.1% in the 3rd quarter of 2021. The infection rate increased in each quarter – from 16.37% in the first quarter to 19.8% in the second quarter of the same year.

Over the past two years, the sector has remained in the limelight as sugar prices rose massively – almost double – before they fell below 100 rupees per kg prevailing price. in domestic markets.

On March 25, 2021, the Federal Investigation Agency (FIA) detected income of Rs 110 billion by the sugar mafia over the past year through “speculative pricing”.

The sugar industry is believed to have been a profit-making sector, which is why the production of sugar has increased alongside the increase in the area cultivated for sugar cane.

On October 7, 2021, the Federal Committee on Agriculture (FCA) was informed that sugarcane production for 2021-22 was estimated at 87.67 million tonnes. However, the prime minister’s special assistant in charge of agriculture, Jamshed Iqbal Cheema, claimed that sugarcane production would exceed 100 million tonnes. The country needs around 6.2 million tonnes of sugar, compared to the government’s first production estimate of 7 million tonnes.

All this shows that the sugar sector has made huge profits, but the infection rate shows that the sector does not like to repay loans from banks.

The advances of the sugar sector during the 3rd quarter of 2021 reached a total of 202.2 billion rupees while the default amount was 58.9 billion rupees.

In terms of amount, the biggest defaulter was the textile sector – the most pampered industry which received a number of incentives to help increase exports.

The default for the textile sector was Rs 158.4 billion till Q3 2021. The infection rate was 10.1%. The infection rate was lower due to the higher loans the sector got from banks. Advances to the textile sector up to 3Q2021 were Rs 1,570.6 billion.

The textile sector is considered the backbone of the economy, especially for exports, as it accounts for around 60% of 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 that the sector is struggling or gaining additional benefits with the defaults.

Among the sectors, agro-industry was the defaulter of Rs71.4 billion with an infection rate of 8.6% while the amount borrowed was Rs835.3 billion.

Electronics was the second biggest defaulter in terms of infection rate as it reached 17.8% with an amount in default of Rs23.7 billion while the amount borrowed was Rs133.7 billion.

The agricultural sector was another major defaulter with an infection rate of 16.7%; amount in default of 65.5 billion rupees while the total borrowing was 391.4 billion rupees.

Individuals also emerged as high defaulters with an infection rate of 6.4%; the amount in default was 64 billion rupees while the advances for individuals were 998 billion rupees.

Among the segments, small and medium enterprises (SMEs) were the biggest defaulter with an infection rate of 17.9%. SMEs defaulted by 77.1 billion rupees while advances for this segment were 430.2 billion rupees at the end of Q3 2021.

Posted in Dawn, January 12, 2022

Rachel J. Bradford