“50% of textile businesses may close in the upcoming weeks”
The All Pakistan Textiles Mills Association (APTMA) has urged the federal government to review the energy rates in order to make textile exports competitive in the global market, as over 50% of businesses in the textile and apparel sector are at high risk of closing in the upcoming weeks.
An ongoing increase in energy prices that are, on average, more than twice as high as those in rival nations is steadily undermining Pakistan’s exports of clothing and textiles, making it less competitive internationally. In addition, industrial customers’ electricity costs are currently hovering around 16.7 cents per kWh, and gas prices are rising to Rs2,950/MMBtu from Rs2,200/MMBtu at this time—a significant rise from Rs852/MMBtu slightly over a year ago.
APTMA Secretary General Shahid Sattar cautioned that the shutdown of the textile and garment industry will result in severe unemployment and societal unrest in a letter to Energy Minister Muhammad Ali. “Production at these energy rates is not economically viable, and exports from the sector have stagnated. Regional economies like Bangladesh, India, and Vietnam, which have much lower energy costs, are gaining market share at our expense, he claimed.
At the same time, Pakistan’s macroeconomic outlook is weak as high inflation continues to prevail, and the external sector remains vulnerable with no increase in foreign currency profits. The economy is trapped in an entirely unsustainable scenario where industrial output is decreasing daily. This will have ramifications not just on employment and poverty but also on power sector revenue and the government’s fiscal position.
Since Q2FY24, the amount of power used in industries has been decreasing. The quarterly tariff adjustment (QTA) for the current quarter shows that the industrial contribution to the fixed costs of the power sector has also decreased, forcing a rise in the power rates of all other consumer categories.
This is probably going to lead to an even greater decrease in industrial power use and further hikes in power tariffs for all users. The industry can no longer afford to pay for cross subsidies to unproductive industries in their energy bills, he added, adding that we are trapped in a vicious cycle of falling demand and rising tariffs with no end in sight.
The inability of these cross subsidies to be exported creates an economic distortion that severely reduces Pakistan’s manufacturing industries’ ability to compete globally.
He warned that over 50% of businesses in the textile and apparel sector are at high risk of closing, resulting in widespread unemployment and social unrest. “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.
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