Textile export industry facing acute cash flow crunch: Pasha

FAISALABAD: Textile export industry has entered into a sustainable economic growth phase; aiming to hit $21 billion mark in FY-2021-22; however, some irritants have slowed down the pace which may cause to miss the desired goal. Government must accord immediate remedial measures as delay will shatter all the efforts and halt the growth momentum.

In a statement, here on Monday, Chairman Pakistan Textile Exporters Association (PTEA) Sohail Pasha said the country had seen a rapid recovery of exports since the removal of corona virus-related restrictions as its outbound shipments have actually risen faster than those of regional competitors Bangladesh and India. Textile industry has also picked up a growing pace witnessing a sharp surge of 26% year-on-year to $9.38 billion in the first half of FY 2021-22. However, emergence of an economic crisis will be an instant setback, coupled with rising manufacturing expenses, energy issues, squeezed financial assistance, rising prices of raw material and lack of investment are among various factors which may hit the growing trend.

Highlighting the core issues, he said that extreme cash flow crunch has squeezed the financial streams as major portion of exporters’ working capital is still suck in refund regime. Giving details, he said that around 365 billion rupees are stuck in sales tax, Duty Drawback and income tax refund regime; whereas 85 billion rupees are pending under textile policy incentives i.e. DLTL, TUF & mark-up Support scheme.

He described that due to increasing trends of commodity prices and growth in exports, working capital requirements for textile sector have been drastically increased as an increase of 31 percent in home textile and 41percent in knitting garments inputs has been witnessed; however, banks are shying away from extending new credit lines despite the phenomenal performance of the industry.

PTEA’s Patron-in-Chief Khurram Mukhtar, considering subsidized energy tariffs of 9 cents/unit for electricity and $6.5 per MMBtu for gas for export-oriented sectors as not a subsidy, stressed the Government to carry out the cost-of-service study and set tariffs accordingly. He pointed out that the recovery of industrial consumers is 100%; whereas distribution losses are zero. Moreover, Efficient Energy Plants (57% to 80%) are being used with waste heat recovery in steam and hot jacket water used for processing.

He urged for extension in energy package and enhancement in gas quota for co-generation from 38% to 50% as only 53 MMCFD is being used by textile captive instead of 75 MMCFD. He pointed out that Drawback of Taxes (DDT) incentive was allowed to textile exporters based on their exports which resulted in significant growth in textile exports. In order to sustain the growth momentum, this incentive should be continued, he demanded. SBP has amended foreign exchange regulations requiring exporters to bring export proceeds within a maximum period of 120 days from shipment. He demanded to reverse the decision as it will impact competitiveness and restrict existing export growth. Highlighting another important issue, he said that containers retention limit is only 180 days in Pakistan, so shipping companies don’t prefer to hold empty container inventory. Approximately containers of USD 300 Million remain stuck at exporters, premises, transit and port. Allow shipping companies to retain empty containers for 270 days instead of 180 days, he demanded. He stressed for allocation of specific train for moving empty containers to upcountry on concessionary rats. He emphasized for an upgradation in infrastructure development within industrial clusters especially, Road infrastructure, Healthcare Centres, Trauma Centres & security issues.

PTEA leadership urged the government to take serious cognizance of the issue and remove these bottlenecks to protect the pace of economic and trade progress.

Copyright Business Recorder, 2022