Textile mills fear closure in absence of RCET
PHOTO: FILE
Textile millers have cautioned the government that a significant number of exporting units could be closed down as they have lost competitive edge following discontinuation of the Regionally Competitive Energy Tariff (RCET).
All Pakistan Textile Mills Association (Aptma) Patron-in-Chief Dr Gohar Ijaz, in a letter sent to Prime Minister Shehbaz Sharif on Wednesday, said that the withdrawal of RCET was likely to result in closure of a significant part of export industry, leading to unemployment, loss of export revenue and further deterioration in balance of payments.
He pointed out that textile exports had surged 55% from $12.5 billion to $19.5 billion in financial year 2021-22, which was attributable to the application of competitive energy tariffs.
RCET significantly enhanced the industry’s competitiveness on the global stage and enabled Pakistani products to compete well with countries of the region, he said.
Furthermore, the improved competitiveness of Pakistan’s textile industry attracted an additional investment of $5 billion in expansion and new projects. The investment augmented the export capacity by an estimated $5-6 billion per annum.
With such promising trends, Ijaz emphasised, Pakistan was on track to fetch $22-24 billion in textile exports in the current fiscal year but foreign exchange constraints combined with the withdrawal of RCET, difficulties in energy supply and the liquidity crisis as a consequence of currency devaluation halted the upward momentum.
This year alone, Pakistan is experiencing a shortfall of over $3.5 billion in textile exports as compared to exports of $19.5 billion last year.
In spite of the fiscal challenges, Ijaz said, the government rightly continued the RCET facility for most of the year. However, its “withdrawal at a time when the country is in need of foreign exchange is confusing.”
“Without the continuation of RCET, our exports will inevitably decline, leading to a much lower-than-expected influx of foreign exchange,” he stressed.
Apart from that, he added, 75% of the industrial establishments in Punjab, which did not have cheaper gas supply, were expected to cease operations in the next three months.
The Aptma patron cautioned that the impact of RCET discontinuation would not be limited to the large-scale manufacturing sector, but would also extend to small and medium enterprises and the cottage industry, which had formed clusters and were feeding the big manufacturers.
Published in The Express Tribune, June 22nd, 2023.
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