- In letter addressed to PM Shehbaz, association says sector operating at capacity utilisation of less than 50%
All Pakistan Textile Mills Association (APTMA) on Friday warned that the country’s textile exports could fall below $1 billion a month from 2023 onwards, highlighting a range of issues facing the sector that is currently operating at less than 50% capacity utilisation.
In a letter addressed to Prime Minister Shehbaz Sharif dated December 23, 2022, a copy of which is available to Business Recorder, APTMA’s Patron-in-Chief Gohar Ejaz said the international economic situation “primarily caused by the Ukraine crisis combined with the floods in Pakistan have combined to formulate the perfect storm for our economy”.
“The textile sector is now operating at a capacity utilisation of less than 50% across the country. A very substantial number of jobs have already been lost and many more are to follow if remedial measures are not urgently undertaken,” it said.
In its letter, APTMA attributed the decline to supply chain disruptions, liquidity constraints, energy shortages, and non-functioning of new projects.
APTMA said recent floods destroyed the cotton crop with only 5 million bales available this year while the industry requires 14 million bales.
Meanwhile, foreign exchange issues have curtailed the import of cotton and other essential inputs for exports. The cost has increased by 20% due to demurrage /detention and delays, it added.
“Clear all imports of export-oriented sectors which have arrived at parts whether against Letter of Credit (LCs) or cash against documents,” said APTMA.
“Priority (should be given) for and exempting export-oriented sectors from import controls allowing LCs for raw material machinery, spare parts and other items to restore industry’s supply line, and refund all demurrage and detention charges incurred by EOU Sector to maintain competitive costs for exports,” it said.
On liquidity constraints, APTMA said that a much higher quantum of funds is stuck in work in progress as a consequence of a 17% sales tax and devaluation on all inputs.
APTMA called for the restoration of SRO 1125, zero rating for the textile value chain while collecting sales tax on domestic sales at the point of sale. It urged to immediately refund all deferred sales tax, tuff and other dues.
The body said that the government should also provide the textile sector with a moratorium on capital repayment from July 1st, 2022 to June 30th, 2023.
The association added that due to marked differences in RLNG/gas rates being offered to textile mills in Sindh and Punjab, Punjab-based industries are no longer viable and have no option but to close down as they are no longer competitive and available orders are shifting or in process of shifting to the cheaper alternatives internationally and within Pakistan.
APTMA called for the implementation of Weighted Average Cost of Gas (WACoG) while extending Regionally Competitive Energy Tariffs (RCET), across the country to enable new industrial units, expansions and Punjab-based industries to compete.
The textile mills association highlighted that industrial estates including, Lasbela Industrial Estate Development Authority (LIEDA), Faisalabad Industrial Estate Development and Management Company (FIEDMC) and Sundar Industrial Estates-based industries are being denied the concessional power tariffs leaving the export industries uncompetitive and cash strapped.
It called for ensuring the availability of concessional tariffs to export-oriented industries located in industrial estates.
APTMA also said that the textile sector invested $5 billion, in the past two years, in setting up new factories.
“However, some of the machinery of new plants/ expansions is still stuck at ports, LCs are being delayed for spare parts, and electricity and gas are not being provided to these new units.
“Machinery that has arrived at ports and is not being cleared delaying projects and incurring capital costs to a level where they have become uncompetitive,” it said, adding that shipments of machinery and spare parts which have arrived at ports or are at sea to be cleared.
Moreover, Long Term Financing Facility (LTFF) be provided where LCs already opened and loans approved by banks.