Rising energy costs: APTMA says 50pc industry at high risk of closure

ISLAMABAD: All Pakistan Textile Mills Association (APTMA) has again raised its voice against high electricity and gas tariffs and their implications on industry especially textile industry, cautioning that if urgent measures are not taken over 50 percent of industry will be at high risk of shutting down.

In a letter to caretaker Minister for Power and Petroleum, Muhammad Ali, Executive Director, APTMA Shahid Sattar, noted that the international competitiveness of Pakistan’s textiles and apparel exports is being continuously eroded by ever increasing energy prices that are, on average, more than twice those in competing countries and merit Power Minister’s attention.

According to APTMA, electricity for industrial consumers are hovering around Cents 16.7/ kWh and the price of gas is being increased to Rs2,950/ MMBTU from current price of Rs2,200/ MMBTU and Rs852/ MMBTU a little over a year ago.

APTMA assails ‘unprecedented’ gas tariff hike

In the letter, APTMA argued that at prevalent energy rates, production is not financially feasible and the sector’s exports have stagnated as the country has lost market share to regional economies like Bangladesh, India and Vietnam with significantly lower energy tariffs.

At the same time, the country’s macroeconomic outlook remains weak as high inflation continues to persist, and the external sector remains vulnerable with no improvement in foreign exchange earnings. The economy is stuck in a wholly unsustainable situation where industrial activity is shrinking with every passing day, with further implications not just for employment and poverty but also for power sector revenue and the government’s fiscal position.

With industrial power consumption declining since at least Q2FY24, industrial contribution to the fixed costs of the power sector has also declined such that it has necessitated an increase in the power tariffs of all other consumer categories, as reflected in the Quarterly Tariff Adjustment (QTA) for the current quarter. This will likely cause a further decline in industrial power consumption and necessitate further increases in power tariffs for all consumers.

“We are stuck in a vicious cycle of declining consumption and increasing tariffs with no end in sight. The industry can no longer bear the burden of paying for cross subsidies to non-productive sectors in their energy tariffs. These cross subsidies are an economic distortion and therefore significantly weigh down on the international competitiveness of Pakistan’s manufacturing sectors,” said Shahid Sattar, Executive Director APTMA, in his letter.

Copyright Business Recorder, 2024