Political Unrest
Import LC cancellations soar to $1.5b in FY14
Cancellations of the import-related letters of credit increased to $1.50 billion in the recently concluded financial year 2013-14 from $1.35 billion in the FY13.
A BB official told New Age on Thursday that disagreement between importers and exporters and dull business situation in the country amid political uncertainty put an adverse impact on the import sector which forced the businesspeople to cancel their LCs.
He said scheduled banks’ earnings from LCs had shrunk in the FY14 due mainly to cancellations of import orders.
‘The banks usually get a robust service charge against the LCs if the import orders are not cancelled by importers and exporters. So, the banks’ profit from the area had declined due to the cancellations in the FY14,’ the official said.
LC cancellations occur due mainly to faulty agreements and loopholes in conditions agreed upon by the buyers and the sellers, he said.
The BB data showed that the country’s import payment stood at $37.18 billion in the FY14 from $32.35 billion in the FY13.
So, the cancellation amount of LCs — $1.50million — was large in terms of the country’s overall import volume, the official said.
He said a number of LCs against various items was also cancelled in the concluded financial year because of the political unrest.
Some businesspeople cancelled their import orders amid dull business situation in the country due to the political unrest and uncertainty, he said.
The BB data showed that cancellations of LCs for petroleum and petroleum products increased to $127.55 million in the FY14 from $46.70 million in the corresponding period of the FY13, that of LCs for the pharmaceutical raw materials to $14.40 million from $4.93 million, that of LCs for steel and engineering industry to $6.34 million from $0.64 million, that of LCs for oil seeds to $6.55 million from $3.73 million, that of LCs for scrapped vessels to $50.65 million from $22.89 million, that of LCs for edible oil (refined) to $34.22 million from $0.72 million, that of LCs for pulses to $41.23 million from $14.47 million, that of LCs for onion to $13.36 million from $3.75 million, that LCs for mobile phone parts and accessories to $7.87 million for $2.29 million and that of LCs for spices to $9.88 million from $4.96 million.
The rate of LC cancellations will increase in the coming months if the businesspeople do not get an investment-friendly business situation, said another BB official.
He said that LC cancellations had remarkably decreased in the FY13 than that of the FY12 due to a comparatively favourable business situation in the country.
The BB data showed that LC cancellations had declined by 46.86 per cent in the FY13 compared with that of an increase of 35.95 per cent in the FY12.
LCs for import of items worth $1.35 billion were cancelled in the FY13 against $2.55 billion in the FY12. The figure was $1.88 billion in the FY11.
-With New Age inpput
