50% of textile companies may close in the coming weeks

Islamabad:

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

The international competitiveness of Pakistan’s textile and apparel exports is constantly being eroded by persistently rising energy prices that are, on average, more than double those in competing countries. Moreover, electricity prices for industrial consumers are at 16.7 cents/kWh and natural gas price is increasing to Rs 2,950/MMBtu from Rs 2,200/MMBtu currently, a notable increase from Rs 852/MMBtu a little over from a year ago.

In a letter addressed to Energy Minister Muhammad Ali, APTMA, General Secretary, Shahid Sattar warned that the closure of the textile and apparel sector will cause widespread unemployment and social unrest. “Production at these energy rates is not economically feasible and the sector’s exports have stagnated. We are losing market share to regional economies that have significantly lower energy tariffs such as 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 without improvement in foreign exchange earnings. The economy is stuck in a completely unsustainable state in which industrial activity is shrinking every day. This will affect not only employment and poverty, but also the revenue of the electricity sector and the fiscal position of the government.

Reading The textile industry is facing an alarming decline

Industrial power consumption declines from Q2FY24. In addition, the industry’s contribution to the electricity sector’s fixed costs has also declined, necessitating an increase in the electricity tariffs of all other categories of consumers, as reflected in the quarterly tariff adjustment (QTA) for the current quarter.

“This will likely cause an even greater reduction in industrial energy consumption and will require further increases in electricity tariffs for all consumers. We are stuck in a vicious cycle of reducing consumption and increasing tariffs without end,” he said, adding that industry could no longer bear the burden of paying for cross-subsidies to unproductive sectors in their energy tariffs.

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

“A delegation of industry leaders from the textile and apparel industry is urgently requesting a meeting with you to explain the precarious position the industry is in and the impact it will have on the entire economy in the coming months and seek your guidance on a way forward,” he said, warning that if urgent remedial measures are not taken, more than 50% of companies in the textile and clothing sector are at high risk of closing down, causing widespread unemployment and social unrest.

Published in The Express Tribune, February 15^u2024.

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