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Sunday, April 21, 2024

Textile industry at risk of massive closure as IMF nods to restructure power tariff

The failure of the government to secure approval from the IMF to restructure the power tariff has created significant agitation within the textile industry. With the current highest electricity tariff at 14 cents per unit, textile manufacturers are facing substantial financial strain. The inability to renegotiate the tariff not only impacts the competitiveness of the textile industry but also threatens the viability of industrial units.

If the situation persists without resolution, the textile industry’s warnings of massive closures are indicative of the severity of the issue. Closure of industrial units could result in job losses, economic instability, and a broader impact on the country’s industrial landscape.

Efforts to address the concerns of the textile industry and find a sustainable solution to the electricity tariff issue are crucial. Collaboration between the government, industry stakeholders, and international organizations may be necessary to navigate through these challenges and ensure the continued operation and growth of the textile sector.

If the industrial tariff earlier worked out in the range of 18.5-11.75 cents per unit by the power division supported by SIFC (Special Investment Facilitation Council) which was part of the new power tariff regime was not given a go-ahead, then the country’s industrial sector cannot thrive as over 50 percent of firms in the textiles and apparel sector are at high risk of shutting down over the coming weeks which will cause widespread unemployment and social unrest,” says Shahid Sattar, Secretary General of All Pakistan Textile Mills Association (APTMA).

In separate letters addressed on Wednesday to two key ministers of the caretaker regime, Federal Energy Minister Mr. Muhammad Ali and Federal Minister for Commerce, Industries, Investment, and Interior Dr. Gohar Ejaz, the All Pakistan Textile Mills Association (APTMA) highlighted the dire situation faced by both the export and non-export sectors of the textile industry.

Electricity prices for industrial consumers in Pakistan are hovering at 16.7 cents/kWh and the price of gas is being increased to Rs. 2,950/MMBtu from Rs. 2,200/MMBtu at present and Rs. 852/MMBtu a little over a year ago. The inability to compete with products from countries like Bangladesh, Vietnam, and India due to the region’s highest tariff is exacerbating the challenges faced by Pakistan’s industries in the international market. In the EU, energy makes up between 5.7% and 8.4% of the production costs of sectors such as basic chemicals, man-made fibres. Power tariffs in Bangladesh is even less costly than neighboring country India, price of each unit of electricity in Bangladesh is 7 taka 32 paisa while it is Tk 11.15 in New Delhi, Tk 11.33 in Maharashtra, Tk 8.63 in Punjab.

The correspondence underscores the urgency and severity of the challenges confronting the textile industry, including issues related to energy costs, export competitiveness, and overall industrial sustainability. By drawing attention to these pressing concerns, APTMA aims to engage relevant authorities in addressing the critical needs of the sector and finding viable solutions to mitigate the adverse impacts.

The All Pakistan Textile Mills Association (APTMA) has rightly called for an urgent meeting of industry leaders from the textiles and apparel sector with the two concerned ministers. Their plea underscores the gravity of the situation: the export industry is on the verge of collapse, and Pakistan is steadily losing its global market share.

Such a meeting is crucial for fostering dialogue and cooperation between industry representatives and government officials. Together, they can explore strategies to address the pressing issues confronting the textile industry and devise effective solutions to enhance export competitiveness.

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