Pakistan Faces Looming Crisis as 50% of Textile Firms May Shut Down
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- Published: Thursday, 15 February 2024 11:45
Pakistan's textiles and apparel sector is on the brink of a major crisis, with more than 50% of firms facing the imminent threat of closure in the coming weeks. The All Pakistan Textiles Mills Association (APTMA) has sounded the alarm, urging the federal government to urgently review energy rates to ensure the competitiveness of textile exports in the global market.
The ongoing surge in energy prices is eroding the international competitiveness of Pakistan's textiles and apparel exports. Energy prices in the country are over twice as high as those in competing nations, posing a significant challenge for the sector. Industrial electricity prices stand at 16.7 cents/kWh, while the price of gas is set to increase from Rs2,200/MMBtu to Rs2,950/MMBtu, marking a notable hike from Rs852/MMBtu just over a year ago.
In a letter addressed to Energy Minister Muhammad Ali, APTMA Secretary General Shahid Sattar highlighted the dire consequences of the sector's potential closure. He emphasized that production at current energy rates is financially unfeasible, leading to stagnant exports and a loss of market share to regional competitors like Bangladesh, India, and Vietnam, which benefit from significantly lower energy tariffs.
The macroeconomic outlook for Pakistan remains weak, with persistently high inflation and vulnerabilities in the external sector. The shrinking industrial activity poses not only employment and poverty challenges but also threatens power sector revenue and the government's fiscal position.
Industrial power consumption has been declining, contributing to a reduction in industrial contributions to power sector fixed costs. This decline necessitates tariff increases for all consumer categories, perpetuating a vicious cycle of declining consumption and rising tariffs. Sattar emphasized that the industry can no longer bear the burden of subsidizing non-productive sectors through energy tariffs.
The cross subsidies prevalent in energy tariffs distort the economy and hinder the international competitiveness of Pakistan's manufacturing sectors. APTMA urgently requests a meeting with the Energy Minister to address the industry's precarious situation and its implications for the economy. Without corrective action, over 50% of firms in the textiles and apparel sector face the risk of closure, leading to widespread unemployment and social unrest.
The looming crisis underscores the urgent need for government intervention to review energy rates and support the survival and growth of Pakistan's vital textiles and apparel industry. Failure to act swiftly could have devastating consequences for both the industry and the broader economy.