Textile industries in India, Pakistan and Bangladesh fulfilled gas needs from cheap gas imported from Gulf countries. Most industries produced power from this gas. The gas prices have touched the roof increasing the cost of production of yarn and fabric.
The basic textile sector (yarn and fabric) consumes more power and energy in their processes. Power accounts for 30 percent of the production cost now. In Pakistan the gas supplies to the industries are subsidized but after increase in global gas rates gas tariff has been enhanced from$6 per mmbtu to $9 per mmbtu an increase of 30 percent. This increase has been accompanied with a huge increase in cotton rates. The yarn prices however have come down.
The value added sector consumes much less power and the impact of power on their processes is limited to 5-7 percent of the total production cost of the finished products. They may not be impacted by increase in gas as much as they will be on increase in yarn rates. The story is almost the same in the textile sectors of India and Bangladesh.
Energy crisis has engulfed the European Union because of the suspension of gas supplies from Russia after the Ukraine war. The Europeans looking for alternate sources have turned to Asian suppliers for gas supplies.
Russian gas was cheaper than the prices quoted by Asian suppliers before the war. The rush of European buyers to secure Asian gas not only resulted in manifold increase in gas prices but also choked supplies for Asian consumers like India, Pakistan, and Bangladesh. The three countries have contracts with Qatar, the largest gas supplier for a certain quantity.
Additional supplies, if required, were easily purchased from vessels carrying gas in the open sea. Before the Ukraine war the excess gas from Gulf countries was available from floating vessels in the Arabian sea at the same or less than the contracted rates at which the gas was supplied to the Asian economies. Now these floating vessels sell gas at exorbitant rates and the European buyers totally starved of gas gladly buy it leaving Asian buyers high and dry.
