‘50% textile firms may shut down in coming weeks’

APTMA says production at these energy rates no longer feasible

ISLAMABAD:

With over 50% of firms in the textiles and apparel sector at high risk of shutting down over the coming weeks, All Pakistan Textiles Mills Association (APTMA) has called upon the federal government to review the energy rates to make textile exports competitive in the international market.

The international competitiveness of Pakistan’s textiles and apparel exports is being continuously eroded by persistent surge in energy prices that are, on average, over twice those in competing countries. Moreover, electricity prices for industrial consumers are hovering at 16.7 cents/kWh and the price of gas is being increased to Rs2,950/MMBtu from Rs2,200/MMBtu at present, marking a notable increase from Rs852/MMBtu just over a year ago.

In a letter addressed to Energy Minister Muhammad Ali, APTMA, Secretary General, Shahid Sattar warned that the closure of the textiles and apparel sector will cause widespread unemployment and social unrest. “Production at these energy rates is not financially feasible and the sector’s exports have become stagnant. We’re losing market share to regional economies that have significantly lower energy tariffs like Bangladesh, India and Vietnam,” he said.

At the same time, Pakistan’s macroeconomic outlook remains weak as high inflation continues to persist, and the external sector remains vulnerable with no improvement in foreign exchange earnings. The economy is stuck in a wholly unsustainable situation in which industrial activity is shrinking with every passing day. This will have implications not just on employment and poverty but also on power sector revenue and the government’s fiscal position.

Read Textile sector faces worrying decline

Industrial power consumption has been declining since Q2FY24. Additionally, industrial contribution to the fixed costs of the power sector has also declined, necessitating an increase in the power tariffs of all other consumer categories, as reflected in the quarterly tariff adjustment (QTA) for the current quarter.

“This will likely cause even more of a decline in industrial power consumption and necessitate further increases in power tariffs for all consumers. We are stuck in a vicious cycle of declining consumption and increasing tariffs with no end in sight,” he said, adding that the industry can no longer bear the burden of paying for cross subsidies to non-productive sectors in their energy tariffs.

These cross subsidies are an economic distortion that cannot be exported and therefore significantly hinder the international competitiveness of Pakistan’s manufacturing sectors.

“A delegation of industry leaders from the textiles and apparel sector urgently requests a meeting with you to explain the precarious position the industry is in and the implications this will have on the entire economy over the coming months, and to seek your guidance on a way forward,” he said, warning that if corrective action is not taken urgently, over 50% of firms in the textiles and apparel sector are at high risk of shutting down causing widespread unemployment and social unrest.

Published in The Express Tribune, February 15^th, 2024.

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