A flourishing textile sector, export-oriented, value-added, and globally competitive, would benefit all stakeholders and the general economy. But the conflicts that occupy throughout the value chain contribute as much to its struggles as do the vociferously expressed issues of labour costs and energy shortfall.
The latest conflict of interest in the series of battles waged between the chemical sector and its downstream textile sector is that of hydrogen peroxide. While it is used for a variety of applications such as waste water treatment and exhaust air treatment, its primary use is for dyeing and bleaching processes in the textile industry.
This month the All Pakistan Textile Processing Mills Association (APTPMA) raised a hue and cry on the higher prices and shortage of H202. Among the dire doom and gloom scenario painted, a large scale shut down of the processing industry was indicated. It is only recently that exports in value added textiles have finally shown some shaky growth. Such a pronouncement spells dire news for exports and the precarious current account situation. Fingers have been pointed at local manufacturers to create artificial shortages and act as a cartel.
On the other hand, All Pakistan Chemical Manufacturers Association (APCMA) has attributed the current situation to regional price hikes and demand supply conditions. In a seemingly patriotic statement, APCMA claimed that its members have been supplying products locally despite having the option to export at much better prices.
Currently, the hydrogen peroxide industry is protected by 11 percent tariffs. APCMA claims that these tariffs allow import substitution of $24 million per annum. APTPMA would like those tariffs to be slashed down to 0 at least till the situation is resolved.
Over the years, major players Sitara peroxide and Descon have approached NTC for anti-dumping duties. In 2010, when NTC enforced anti-dumping duties on the import of H202, it led to prices jumping from Rs.40 per kg o Rs.70 per kg. This is hardly surprising since provisional anti-dumping duty on imports from China was as high as nearly 72 percent. However, the domestic production capacity of hydrogen peroxide is 60,000 tons against a requirement of 70,000 to 80,000 therefore imports are necessary to compensate for the shortfall.
Globally, hydrogen peroxide is an important chemical contributing to about 12 to 15 percent of worldwide chemical industry revenues. It is also one of the few chemicals produced domestically and contributes towards import substitution; to protect its industry, India has implemented anti-dumping duty ranging from $17 to $118 per ton, depending on the producer and exporter.
But, without its consistent and cost-effective supply, Pakistan’s key industry textiles is the one that suffers, and resultantly exports. Hence the paradox – protect the chemical sector at the cost of the textile sector or provide cheap imported raw materials to the textile sector at the cost of the chemical sector. This is a question to which no answer has been provided despite a tug of war that has lasted since the inception of these sectors and continues to date.