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Wednesday, September 20, 2023

APTMA concerned about declining Punjab export industry

The government is not providing a subsidy to EOUs and the decision to suspend the regionally competitive energy tariff (RCET) of electricity for EOUs across Pakistan will render the textile industry, especially in Punjab said the APTMA Patron-In-Chief.

All Pakistan Textile Mills Association (APTMA) Patron-In-Chief Dr. Gohar Ejaz wrote a letter to Prime Minister, Shahbaz Shareef highlighting the imminent closure of the Punjab export industry. 

Textile exports witnessed a massive increase of over 55% in just two years: from $ 12.5 billion in FY 2020 to $19.5 Billion in FY 2022 as a direct consequence of the competitive energy tariff. The industry as a consequence of the improved competitiveness invested a further $5 billion in the expansion and new projects which enhanced the available export capacity by another $5-6 billion. The country’s textile exports were on their way to achieving $26 billion in 2023 however, the industry lost its momentum recently. 

Moreover, Dr. Gohar Ejaz also highlighted that the government is not providing a subsidy to export-oriented units (EOUs) but indirectly to other sectors primarily the domestic sector. Therefore, the narrative that the government subsidizes the textile sector is inaccurate and needs to be revisited.

He was of the view that taxes, cross-subsidies, and inefficiencies cannot be exported. The decision of the government to suspend the regionally competitive energy tariff (RCET) of electricity for EOUs across Pakistan will render the textile industry, especially in Punjab, uncompetitive within the country and the region. Similarly, the price difference between effective electricity prices in Punjab and Sindh is more than 3.65 times as EOUs in Sindh can generate electricity at Rs.11/kWh from gas being provided at $4/MMBtu while Punjab gets gas/RLNG at $9/MMBtu.

Read more: Textile industry is closing due to supply chain disruptions, warns APTMA

Furthermore, the gas/RLNG being provided to EOUs in Punjab also comes with the condition that it will not be used for electricity generation. Therefore, the only available energy for EOUs in Punjab after March 1st, 2023, will be grid electricity at over Rs. 40/kWh. This will necessarily shift available orders to cheaper alternatives internationally and within Pakistan. The grid electricity apart from being uncompetitive is unreliable and substandard, reducing effective production capacity by over 25%.

 In addition to this, the chief wrote that the intermittent supply of gas/RLNG to Punjab-based EOUs has been at times nil supply, 25% supply, and 50% supply based on average consumption of August, September, and October 2021. This method also ignores new projects and expansions rendering non-operational, significantly enhanced capacity through Terf, etc. over the last two years.

The letter further said that under these circumstances, in addition to the jobs already lost in the past few months, there will soon be further major layoffs leading to significant unemployment of more than 10 million workers in Punjab.

Read more: APTMA rejects fake news on closure of textile industry from Saturday

The government is requested to take these measures

  • Create a level playing field within the country by implementing a uniform gas price of $7 per MMBtu for the export industry across the country.
  • Maintain Rs.19.99/kWh for the export sector across the country to retain competitiveness across the country and internationally.
  • Accord first priority for gas supply to captive power plants of the export-oriented sector.

Lastly, the letter emphasized that urgent intervention is needed to correct this inexplicable disastrous policy and to safeguard Pakistan’s exports and employment. Pakistan cannot afford deindustrialization in Punjab and further deterioration in the balance of payments (Loss of ~ $10 billion in Exports per Annum).