FAISALABAD: High-priced energy is adversely impacting the textile industry, a key driver of the country’s exports and employment. The government must revisit power agreements with Independent Power Producers (IPPs) to save the struggling industry, as the current electricity tariff is unbearable due to capacity charges.
Expressing grave concerns over high-priced electricity for industries, Khurram Mukhtar, the Patron-in-Chief of the Pakistan Textile Exporters Association (PTEA), stated on Friday that high energy costs are a major setback for the country’s exports and economy, directly hampering industrial growth. The current power tariff is almost twice the average faced by competing economies like India, Bangladesh, and Vietnam.
In its budget proposals, the PTEA urged the government to reduce energy tariffs to make the export industry competitive in the region. However, instead of a reduction, the government has imposed fixed charges of Rs. 1250 on electricity consumption, significantly increasing the cost of production.
Mukhtar informed that, against a capacity of 43,000 MW, only 13,000 MW on average is transmitted through the main line, yet consumers have to pay for unutilized electricity. He mentioned that consumers are paying 56% of the price in capacity charges. Mukhtar urged the government to review the agreements awarded to IPPs; otherwise, the industry will not be able to compete and survive.
The textile industry is the single largest contributor to Pakistan’s foreign exchange earnings, accounting for over half of total exports. During 2020-2022, when zero-rated industries were provided with regionally competitive energy tariffs (RCET) of 9 cents/kWh, textiles and apparel exports witnessed a record growth of 54%, rising from $12.5 billion in FY20 to $19.3 billion in FY22. However, as RCET was withdrawn, power tariffs for the export-oriented sector increased to over 14 cents/kWh, causing textile exports to plummet to $16.6 billion in FY24.
Chairman PTEA Arif Mahmood Qureshi emphasized that the textile industry is committed to supporting the country and the government to achieve long-term sustainable growth. However, addressing issues like a power tariff to reduce production cost is essential for the industry to compete in the international market. The export sector is already experiencing negative growth from the beginning of the outgoing fiscal year due to the economic slowdown restricting growth pace.
The inefficient and unfriendly socio-economic environment has significantly escalated the cost of doing business in Pakistan. Intermittent raises in energy inputs and raw materials have rendered exports uncompetitive in the international market. The government must take cognizance of this serious matter and act to save the industrial sector from disaster, as high production costs are hindering its full potential. The textile industry is the only hope for the revival of the country’s economy, which is currently jolted by the high cost of doing business. The government must safeguard the country’s exports and employment by bringing down energy prices to be on par with the region.
Copyright Business Recorder, 2024
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