Pakistan’s textile sector, which makes up around 60% of the country’s exports is seeing a loss in terms of international buyers and their orders. This loss is reportedly due to the growing competition in the region as well as the Cabinet Committee on Energy’s (CCoE) directive to cut gas supply for power production in captive power plants (CPPs) to ensure the domestic consumer gets the maximum gas supply.
The industry has an option to use the electricity from the national grid system because Pakistan’s potential for power production is in surplus despite it being short on gas. However, there is a certain reluctance attached to this due to an untrustworthy power distribution system.
Jawed Bilwani, the chairman of Pakistan Apparel Forum (APF) gave a statement on Tuesday which said “(Textile) exporters have started receiving emails from international buyers for cancellation of their buying orders (in the wake of the disconnection of gas supplies).”
“The CCOE’s (Cabinet Committee on Energy) decision of moratorium on gas/RLNG supply to captive power plants (CPPs) of the export-oriented sector will result in massively regressing the export sector outlook and put a break to any future expansion or investment,” express the All Pakistan Textile Mills Association (Aptma).
“Given the past performance and frequent breakdown, the industry does not have faith that the power sector will be able to deliver on a sustained, stable and competitive basis,” it added.
It further stated that the captive power plants (CPPs) used by the industry for power production via gas-fired power generators are 85% less expensive than power from the national grid station. CPPs power production costs seven cents per unit (kWh), in contrast to the national grid where it costs 13 cents per unit.
“The previous decision of CCOE to reduce the price of power to 7.5 cents to encourage mills to shift to the grid was not implemented, and the decision to impose a gas supply moratorium for captive power of EOUs (export-oriented units) will result in an increase of over 10% in the costs of export orders,” stated Aptma.
As a sign of protest, an alliance had been formed against the government’s decision, at the Federation of Pakistan Chambers of Commerce and Industry (FPCCI).
“The government should withdraw the gas for captive power plants in a phased manner and not abruptly,” Samiullah Tariq, the Head of Research at Pak-Kuwait Investment Company (PKIC) expressed on Twitter.
“There are around 1,200 captive power plants installed at individual industrial units, which consumes 400 million standard cubic feet per day of gas (mmscfd),” reported Express Tribune.
“Mills have started receiving calls from banks to verify how they will fulfill the (international buyers) orders based on gas/RLNG supply and payback of refinance facilities is being demanded. New financing facilities for investment and refinance have been abruptly put on hold by the financing institutions,” Aptma stated.
“The abrupt and ill-conceived change in policy will bankrupt these companies,” it added.