Islamabad:
Pakistan’s textile exports rose marginally by 3% to reach $1.3 billion in March 2024 compared to the same month last year, according to provisional data compiled by the All Pakistan Textile Mills Association (Aptma).
Last year in March, textile manufacturers had exported goods worth $1.26 billion. Compared to exports of $1.41 billion in February 2024, textile shipments recorded a decline of about 8% in March 2024.
Earlier, textile exports rose 20% in February compared to shipments of $1.18 billion in the same month a year earlier. However, on a month-on-month basis, textile exports fell more than 3% in February from $1.46 billion in January.
Exports increased for four consecutive months compared to last year. Overall, textile exports were flat in the first nine months of the current fiscal year, falling 0.3 percent, or $0.04 billion, to $12.44 billion.
Industry officials attribute the decline to a manifold increase in input costs for textile manufacturers, which makes exports uncompetitive in the international market.
The textile industry has already warned the Special Investment Facilitation Council (SIFC) of the possibility of further reductions in shipments in the absence of economically viable energy supplies.
He pointed out that the lack of a competitive source of energy for industry was a major obstacle to sustaining manufacturing activities and international competition.
Exporters enjoyed a regionally competitive energy tariff of 9 cents per kilowatt-hour (kWh) in the 2021-22 financial year, which led to a record 54% increase in textile and apparel exports, from $12.5 billion in 2020 to $19.3 billion in FY22.
However, the electricity tariff for export-focused companies later rose to over 14 cents per kWh, leading to a drop in textile and apparel exports to $16.5 billion in 2023.
Reading Textile exports are down again despite annual growth
The price of electricity for industrial consumers rose from 14 cents per kWh to around 17.5 cents (Rs 46) due to the quarterly tariff adjustment due to lower energy consumption and fuel duty adjustment of Rs 7,056 per kWh for January of 2024.
The power sector regulator recently announced an increase of Rs 2.7492 per kWh in the unified tariff which is burdening consumers with an additional cost of Rs 85.2 billion for the second quarter of FY24.
The textile industry fears that the recent hike in electricity tariffs will have a further negative impact on exports due to the high cost of inputs.
The electricity tariff for Pakistan’s textile industry is more than double the average tariff paid by competing companies in regional economies such as Bangladesh (8.6 cents/kWh), India (average 10.3 cents/kWh and 6 cents /kWh for textile and apparel companies in Maharashtra ) and Vietnam (7.2 cents/kWh).
Additionally, natural gas prices for industrial consumers have increased to Rs 2,750 per million British thermal units (mmBtu), an increase of 223% from January 2023. This has affected the economic viability of captive power plants of industrial units , which are an important part of the industry.
Consequently, textile and apparel exports have remained stagnant at around $1.4 billion per month, which is $600 million below the installed capacity of $2 billion per month.
Textile industry body Aptma has highlighted the need for the government to adopt the Competitive Trade Bilateral Contract Market (CTBCM) model to enable business-to-business (B2B) electricity supply contracts with a 1-1.5 cent system / wheel usage charge per kWh, excluding cross-subsidies and sunk costs.
The demand aims to enable industry to source green energy at competitive end-user prices through captive power generation from geothermal plants in depleted oil fields, solar-wind hybrids and other green energy producers.
In addition, the textile industry has called for the solar grid cap for industrial consumers to be increased from 1 megawatt to 5 MW in an effort to facilitate the transition to net zero emissions by adding over 3,000 MW of clean energy at the point of consumption. without any investment or guarantee from the government.
Published in The Express Tribune, April 3rd2024.
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