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KARACHI: All Pakistan Textile Mills Association (APTMA) has urged the federal government for a level playing field within the country by implementing a uniform gas price of $7 per MMBtu for the export industry across the country.

APTMA has also warned that the decision of the government to suspend the regionally competitive energy tariff (RCET) of electricity for Export Oriented Units (EOUs) across Pakistan will hurt the textile industry, particularly the Punjab-based industry.

In a letter sent by Dr Gohar Ejaz Patron-in-Chief APTMA to Prime Minister Mian Muhammad Shahbaz Sharif has raised the issue of suspension of the RCET of electricity for EOUs and informed that textile exports witnessed a massive increase of over 55 percent from $ 12.5 billion in FY 2020 to $19.5 billion in FY 2022 as a direct consequence of the competitive energy tariff.

APTMA ‘North Zone’ warns govt against withdrawal of RCET

The textile industry as a consequence of the improved competitiveness invested a further $5 billion in the expansion and new projects which enhanced the available export capacity by another $5-6 billion, he added.

“Pakistan was; therefore, well on the way to achieving $26 billion in textile exports in 2023; however, this momentum is being lost”, he mentioned.

The total cost of regionally competitive energy tariff (RCET), if the differential is treated as the subsidy or cost is only 2.67 percent.

Gohar further informed that actual cost of service (excluding cross-subsidy is 9.3 cents/kWh which implies that the government is not providing a subsidy to EOUs but indirectly to other sectors primarily the domestic sector. The narrative that the government subsidizes the textile sector is; therefore, inaccurate and needs to be revisited, he mentioned.

“It is universally acknowledged that taxes, cross-subsidies and inefficiencies cannot be exported. The regionally competitive electricity tariffs depicted that Pakistan’s energy tariff is 16 cents compared to 8 cents in India.”

He said that the decision of the government to suspend the regionally competitive energy tariff (RCET) of electricity for EOUs across Pakistan will render the textile industry, especially in Punjab, uncompetitive within the country and the region. This move will particularly hurt Punjab-based industries, he added.

Gohar pointed out that the price differential between effective electricity prices in Punjab and Sindh is more than 3.65 times as EOUs in Sindh can generate electricity at Rs.11/kWh from gas being provided at $4/MMBtu while Punjab gets gas/RLNG at $9/MMBtu.

The gas/ RLNG being provided to EOUs in Punjab also comes with the caveat that it will not be used for electricity generation. Therefore, the only available energy for EOUs in Punjab after March 1st, 2023, will be grid electricity at over Rs. 40/kWh.

This will necessarily shift available orders to cheaper alternatives internationally and within Pakistan. The grid electricity apart from being uncompetitive is unreliable and substandard, reducing effective production capacity by over 25 percent.

This anomaly is further compounded by the intermittent supply of gas/ RLNG to Punjab-based EOUs which has been at times nil supply, 25 percent supply and 50 percent supply based on average consumption of August, September and October 2021.

Patron-in-Chief APTMA said that under these circumstances, in addition to the jobs already lost in the past few months, there will soon be further major layoffs leading to significant unemployment of more than 10 million workers in Punjab.

Under these circumstances and facts, he has requested the government to create a level playing field within the country by implementing a uniform gas price of $7 per MMBtu for the export industry across the country.

In addition, maintain Rs.19.99/kWh for the export sector across the country to retain competitiveness across the country and internationally and accord first priority for gas supply to captive power plants of the export-oriented sector.

He urged the Prime Minister Shahbaz Sharif for urgent intervention to correct this inexplicable disastrous policy and to safeguard Pakistan’s exports and employment.

Gohar said that Pakistan cannot afford deindustrialization in Punjab and further deterioration in the balance of payments.

Copyright Business Recorder, 2023

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Fouzi Feb 21, 2023 08:28pm
why APTMA is silent on zero rated sales tax while giving the argument that its a part of deal with IMF?
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