By Raza Khan

ISLAMABAD, Aug 5 (INP-WealthPK): All Pakistan Textile Mills Association (APTMA) has demanded that the government restore gas supply to the sector and announce a long-term regionally competitive energy tariff (RCET) plan.

“The government should immediately restore full gas supply to the entire textile industrial chain, and a long-term RCET policy must be formulated,” Shahid Sattar, Secretary General of APTMA, told WealthPK.  

He said that 26% growth in textile exports was made possible during the last fiscal year 2021-22 due to uninterrupted gas supply and provision of electricity at regionally competitive tariff. He added that the textile industry showed exemplary performance of uplifting exports from $12.5 billion in 2019-20 to over $19 billion in 2021-22 with an increase of 60%.

The APTMA secretary general said that gas supply to the industry has been suspended since June 30, 2022, which has disturbed the production in the whole value-added textile sector, causing loss to the economy. He said large-scale closure of mills has resulted in massive layoffs. He demanded that the gas supply to the export-oriented industry should be restored immediately before it loses the momentum of production, expansion and exports.

Shahid also said that electricity tariff above 7.5 cents/kWh was not competitive, particularly within the region, and it should stay at 7.5 cents/kWh for electricity along with $6.5/mmbtu for gas.

“Revising energy tariff after a short period of time not only shakes investors’ confidence, but also reduces exports,” he noted.   

Shahid said that the textile industry through the RCET has achieved export maximization, job creation and investment.

“The industrial electricity tariff of regional competitors is still lower than Pakistan,” he pointed out, adding that the objective to become an export powerhouse cannot be achieved until power tariffs remain at a competitive and stable level.

According to a report of Pakistan Institute of Development Economics (PIDE), the significance of the textile sector in Pakistan is undeniable. “The sector contributes around 60% of the total export earnings and provides employment opportunities to around 40% of the total labour force,” the report says.

Although substantial export earnings of Pakistan are based on textile products, their share in the international textile exports is considerably low. Out of a total of $792 billion of textile exports, Pakistan contributes just 1.7%.

According to the PIDE report, energy cost is the leading component in terms of conversion cost in the textile sector. Among all the factors that can make the textile sector of Pakistan regionally un-competitive, energy tariff is at the core.

The recent outshining performance of the textile sector can partially be attributed to the RCET policy that the government has adopted since late 2018, the report says.

PIDE estimates show that a 10% increase in the energy tariff causes a 1.1% decrease in investment within Pakistan’s textile sector.

Similarly, a 10% increase in the energy tariff makes a firm lay off 62 employees on average. Since the number of textile units is around 521, the tariff increment may hurt 32,302 employment opportunities.

Credits: Independent News Pakistan—Wealthpk