APTMA warns of a decline in exports

Islamabad:

The textile industry has warned the Special Investment Facilitation Council (SIFC) about the possibility of further decline in exports due to the absence of an economically viable source of energy for the industry. It has proposed a number of measures to enhance the competitiveness of textile exports in the world market.

He pointed to the lack of an economically viable energy source for industry to sustain manufacturing and compete internationally. According to a presentation made at SIFC, textile industries have called for the abolition of cross-subsidies in non-productive sectors of the economy.

The textile industry body, All Pakistan Textile Mills Association (APTMA), has proposed the operation of Competitive Bilateral Contract Market (CTBCM) to enable business-to-business (B2B) electricity contracts with a System Usage/Wheeling Charge of 1-1.5 cents /kWh, excluding cross-subsidies and sunk costs. This move aims to enable industry to source green energy at competitive end-use prices through captive generation from geothermal plants in depleted oilfields, hybrid solar/wind plants or other green energy producers. In addition, it calls for increasing the solar grid cap for industrial consumers from 1 MW to 5 MW, facilitating the transition to net zero by adding over 3000 MW of clean energy at the point of use, without investment or guarantees from the government. .

All three measures are intended to incentivize a shift away from captive gas production, thereby freeing up domestic gas resources and reducing the Regasified Liquefied Natural Gas (RLNG) import bill,” APTMA said. He also asked to ensure an adequate supply of gas to the cogeneration units and treat them as industrial consumers, given their efficiency of more than 60% and the use of natural gas for processes related to steam and hot water in addition to electricity generation.

Reading: Why Pakistan lags behind in man-made fiber exports

The export sector enjoyed regionally competitive energy tariffs (RCET) of 9 cents/kWh in 2021-22, leading to a record 54% increase in textile and apparel exports from $12.5 billion in 2020 to $19.3 billion in 2022 .However, electricity tariffs for export-oriented companies rose to over 14 cents/kWh, causing textile and apparel exports to decline to $16.5 billion in FY23.

Electricity tariffs for industrial consumers have increased from 14 cents/kWh to around 17.5 cents/kWh (Rs46/kWh) due to quarterly tariff adjustments (QTA) due to reduction in energy consumption, fuel price adjustment (FPA) by 7,056 Rs/kWh for January 2024 and the expectation of higher QTAs for the coming quarters as power consumption continues to decline. Production is economically unfeasible with these electricity tariffs, which are more than double the average faced by competing businesses in regional economies such as Bangladesh (8.6 cents/kWh), India (average 10.3 cents/kWh · 6 cents/kWh for textile and clothing companies in Maharashtra) and Vietnam (7.2 cents/kWh).

In addition, natural gas prices for industrial consumers have risen to Rs 2,750/MMBtu – a 223% increase from January 2023 – eliminating the economic viability of captive generation, which much of the industry relied on in the absence of competitively priced grid electricity . As a result, textile and apparel exports remain stagnant at around $1.4 billion per month – $600 million below the installed capacity of $2 billion/month. The investment of about $5 billion made during the RCET period to upgrade/expand capacity has gone dormant, adversely affecting investor returns, sentiment and confidence in the economy.

Published in The Express Tribune, March 7^u2024.

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