KARACHI, June 4: Pakistan's fabulously rich textile tycoons have baffled the State Bank of Pakistan, financial experts, textile surveyors and also the lay man of Pakistan by declaring that they were losing by a margin of more than 2.5 per cent in their business in a year.

The information and data given by 180 textile mills to a private textile consultant, who was commissioned by the State Bank to determine the business competitiveness in textile trade in post-2005 period revealed that big, medium and small units were doing a business in Pakistan in which the return is negative.

The cost of main input-cotton in respect of spinning, yarn in case of weaving and cloth in case of garments-was found to be in range of 58 to 59 per cent of the total production cost. Financial cost constituted about 6 per cent, utilities 17 per cent, wages more than 8 per cent and administrative cost was about 2 per cent.

Obviously, those who are involved in this exercise are not ready to digest the information and data given by the textile tycoons. They are making a fresh attempt through Central Board of Revenue, the State Bank and other official agencies to get precise and accurate information on business operations of the textile mills in Pakistan.

It was in February last year that the SBP Governor approached the various stakeholders in textile business to prepare a strategy for the upcoming challenges that would be thrown by the WTO and on termination of Multi Fibre Agreement after December 2004.

From January next year, Pakistan will be in the mainstream of textile business on termination of textile export quota regime and would be in direct competition with China, India, Malaysia, Vietnam, Sri Lanka, Bangladesh and Turkey.

"At the moment, there is an absence of knowledge on where we stand in terms of competitiveness and our understanding is based on educated guesses at the best," the State Bank Governor remarked while informing that he had taken an initiative of getting a study on textile competitiveness done through Associated Productivity Consultant, a reputed textile consultant.

The survey focussed on yarn, woven fabrics including denim, knitwear garments, towels, home textiles and woven garments. The cost of conversion of various items were calculated after considering the standard costing heads for variables and fixed cost of power, labour, wages, administration cost, insurance cost, depreciation cost and financial cost.

The Consultant is understood to have carried out a study on textile in Pakistan and were baffled at the initial findings, which shows textile business in Pakistan is a losing proposition.

A 15-member Steering Committee has been formed to study and analyze the results of the findings of the survey. Textile tycoons are carrying out an export business of about $7 billion (about Rs400 billion) in a year and their business quantum in local market is no less than Rs600 billion.

This Rs1,000 billion business has a lot of profit margin as manifested in their lifestyle which matches that of the feudal in Pakistan.Textile tycoons pay hardly Rs300 million tax on their income in a year but they are the biggest borrowers of the banking system and the biggest single declared defaulter.

What puzzles the surveyors is the investment of as much as about $4bn (about Rs220bn) in last four years in the textile business. "If textile is a losing business then why should people put about Rs220bn in last four years," is the question that haunts all those who were exposed to the data and the information given by the textile tycoons.

Figures of the State Bank show that since 1999-00 till March 03 banks offered about Rs103 billion while textile owners invested more than Rs39 billion from their own sources.

It is estimated that 47 per cent of the $4 billion investment in last four years went to spinning, 26.3 per cent to weaving, 10.5 per cent to textile processing, 4.8pc to knitwear garments, 7.7pc in made ups and 5.2 per cent in synthetic textiles.

For the current fiscal year, the investment in textiles is being estimated at around Rs53 billion. Banks are reported to have provided Rs30 billion while the textile owners contributed Rs23 billion. Textile equipment and machinery worth about $600 million is being imported this year.

Investment projection in textiles during 2004-05 is being projected at around Rs60bn -Rs35 billion by the banks and Rs25bn by the private investors. Textile machinery and equipment worth about 600 million dollars is likely to be imported next year.