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ISLAMABAD: All Pakistan Textile Mills Association (APTMA) has sought electricity tariff competitive with regional countries and without cross subsidy of Rs 10.85 per unit being extended to non productive sectors.

The Association tabled its demands with Caretaker Minister for Energy, Muhammad Ali and caretaker Minister for Commerce and Industry Gohar Ijaz and tried to convince them for a tariff which can take exports to $ 2 billion per month.

“Our meetings were very fruitful and we are hoping a government team will find out solution to the issue,” said Chairman APTMA at a press conference along with other office bearers.

High interest rates, power tariffs, costly raw materials: Textile sector will continue to face economic headwinds: APTMA

The Association confirmed that it is in talks with the government for a dedicated power RLNG-fired plant and wheeling so that cheap electricity be provided to the industry, besides the issue of misuse of cheap electricity and gas by some APTMA units which are also involving in selling their products in local market.

The Association and Members of the Federal Board of Revenue also discussed major challenges faced by the textile industry.

In their meeting with the Minister of Commerce, APTMA appreciated the Minister for his role in reigning in the exchange rate and controlling volatility.

The Ministers of Commerce, and Energy were made aware of energy issues faced by the industry — specifically high power tariffs of 16 cents/kWh that are currently being charged to the industry, and the uncertainty surrounding the availability and pricing of gas/ RLNG.

The Ministers informed the members that a solution was close to being found to ensure availability of gas/ RLNG for industry, and disparities in pricing were also being addressed. APTMA expressed appreciation for this.

Regarding electricity-related issues faced by the textile industry, an agreeable solution is still pending. As it stands, the textile industry has an export capacity of $2 billion per month, of which $650 million worth of export industry is closed.

If electricity prices for exporters continue to remain high, a growing number of firms will be forced towards closure. This is evidenced by the 12 percent year on year decline in textile exports for September 2023, while textile exports of our regional competitors including India, Bangladesh, and Vietnam continue to increase.

Members of APTMA conveyed to the Ministers that current tariffs are unsustainable and include a cross-subsidy of Rs. 10.85/kWh to non-productive sectors that cannot be exported.

Exports need to be made competitive to be able to match prices in the international market. If textile firms continue to close, this will prove disastrous for the overall economy. In addition to negative effects on the macro economy and Balance of Payments, effects will also spill over to upstream sectors, including cotton.

Pakistan has been able to reverse the decline in cotton production/ productivity and a bumper crop is expected this year.

This is primarily due to the tremendous effort put in by the Punjab government, especially CM Punjab, and APTMA. One of the reasons for a better crop is that the farmers were promised a Phutti price of Rs. 8500/maund. However, given the large-scale closure of industry, the price currently stands at R. 7500/maund.

“If current power tariffs prevail, further closure of industry will cause cotton prices to plunge even further, with severe implications for vulnerable segments, including farmers,” APTMA said proposing the following solutions in this regard: (i) create a winter tariff category for exporters and announce cost of service tariffs (excluding stranded costs, distribution losses and cross-subsidies) to maintain competitiveness across the country and internationally for the next 6 months; (ii) wheeling B2B contracts with a wheeling/ Use of System Charge of up to 1 cents/kWh, all inclusive excluding cross-subsidies and stranded costs, allow Hybrid Bulk Power Consumers (BPC) concept for both B2B and grid supply to be maintained without any penalty on exit of BPCs from grid supply; (iii) raise the cap on solar net-metering for industrial consumers from 1MW up to 5MW.

This will add 5,000-MW of solar energy at the point of usage, with no upfront investment or guarantees from the government.

Discussions were held with FBR on delays in processing of sales tax refunds faced by several members, causing a liquidity crisis in the industry.

It was conveyed to them that refunds for many industry taxpayers are pending and FASTER refunds to be issued within 72 hours are being inordinately delayed.

Moreover, a large number of sales tax claims are being deferred by the FASTER system, which is not being processed by field officers.

Copyright Business Recorder, 2023

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