The All Pakistan Textile Mills Association (APTMA), which represents the largest industrial sector of Pakistan, has urged the authorities to end cross-subsidies to nonproductive sectors.
APTMA, in its letter dated February 14 and addressed to Caretaker Minister for Energy, Muhammad Ali, warned that if corrective actions are not urgently taken, over 50% of firms in the textiles and apparel sector could shut down in the coming weeks.
APTMA said the international competitiveness of Pakistan’s textiles and apparel exports is being continuously eroded by increasing energy prices “that are, on average, over twice those in competing countries, and merits your urgent attention”.
“Electricity prices for industrial consumers are hovering at 16.7 cents/KWh and the price of gas is being increased to Rs2,950/MMBtu from Rs2,200/MMBtu at present and Rs852/MMBtu a little over a year ago.
“Production at these rates is not financially feasible and the sector’s exports have become stagnant as we lose market share to regional economies like Bangladesh, India and Vietnam that have significantly lower energy tariffs,” said the textile body.
APTMA noted that Pakistan’s macroeconomic outlook remains weak as high inflation continues to persist, and the external sector remains vulnerable with no improvement in foreign exchange earnings.
“The economy is stuck in a wholly unsustainable situation where industrial activity is shrinking with every passing day, with further implications not just for employment and poverty but also for power sector revenue and the government’s fiscal position,” it said.
APTMA calls for urgent removal of power tariff cross-subsidy
APTMA shared that industrial power consumption declined during Q2FY24. Resultantly, “industrial contribution to the fixed costs of the power sector has also declined such that it has necessitated an increase in the power tariffs of all other consumer categories, as reflected in the quarterly tariff adjustment (QTA) for the current quarter,” it said.
“This will likely cause a further decline in industrial power consumption and necessitate further increases in power tariffs for all consumers,” said APTMA.
“We are stuck in a vicious cycle of declining consumption and increasing tariffs with no end in sight. The industry can no longer bear the burden of paying for cross-subsidies to nonproductive sectors in their energy tariffs,” it said, while requesting a meeting with the caretaker minister.
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