The recent textile export growth in Pakistan has occurred despite a wide array of issues in energy. Power supply, reliability, quality, pricing, and gas availability remain a bane for the country’s economic development.
The massive blow to the public and the textile industry is due to a massive hike in power and petroleum prices, fueling inflation. Therefore rendering the country’s textile exports uncompetitive in the global market.
The National Electric Power Regulatory Authority (Nepra) has increased the base tariff by approximately 46% to Rs 24.82 per unit from Rs 16.91. While the price of petrol has been increased to 248.54 and diesel rates, have been increased to 276.54.
The year-on-year inflation is expected to accelerate in July and may remain within the range of 14.5% to 15.5%, according to the monthly Economic Outlook released by the finance ministry. The highest inflation rate in the past decade indicates the adverse impact of increased government-administered fuel and energy prices.
The combined effect of the fuel and power price hike may lead to a historical economic stagnation which would result in bankruptcies, and inevitable defaults on electricity bills, leaving many textile export orders unfulfilled besides causing massive loss of employment opportunities and tax revenue.
With the fear of a sharp increase in unemployment due to the textile industry being affected, the government should take immediate decisions to ensure investment protection through bailout packages for industries.
The increase in energy prices and the implementation of a super tax have been unpopular decisions. They are not in the best interest of consumers as well as the textile trade and industry.
The textile industry and business community have been actively against the self-imposed decision of Nepra to raise the base electricity tariff.
Such tough decisions have put the survival of textile industries at stake, which has, in turn, affected textile exports and the overall Pakistani economy. Who should take steps like bringing power and gas tariffs down to reduce the cost of doing business and to promote textile exports?
The chairman of the Pakistan Yarn Merchants Association, Saqib Naseem, claimed that the sharp increase in energy prices would be catastrophic for business and the textile industry. They urged the government to reduce utility charges for the textile industry to continue trade, export, and other industrial activities seamlessly without delay.
What should ideally exempt textile industries and businesses from load shedding of gas and electricity to meet the local market and textile export targets? All of this has also impacted yarn prices because these problems have also affected spinners. The main issue for the Pakistan textile industry is the high cost of doing business, which needs to be brought down to bring the export industry on equal footing with global competitors.
The textile business community needs to be taken on board in helping to prepare policies that can sustain economic growth and enhance textile exports further so that the increasingly wide trade deficit can be reduced, which is necessary for the country’s uplift.
A sign of Pakistan’s dwindling economy is that local textile producers are expecting a USD 500 million cut in monthly exports from July onwards due to energy shortages that have reduced production capacity by 30%
Due to this gas supply shortage, the Pakistan textile industry will remain closed from July 1 to 8. The interruption of gas supply will majorly affect the textile industries in Punjab because about 70% of textile mills are mainly located there. The current shortage has already reduced textile production by about 30%, and the latest interruption may very well reduce the output by up to 50%, severely debilitating Pakistan’s textile exports.
The interrupted gas supply to the textile industry has affected textile exports which will no doubt impact the export target achievement for the next fiscal year besides increasing unemployment. What had set an export target of $20 billion for the textile industry for FY 2021-22 – is already a lower target than the previous target of $21 billion.
The textile industry’s expansion by opening new factories would exponentially drive exports. Due to the current dynamics and issues, these new up-and-coming factories and businesses still need gas or electricity supply and could not launch successfully. These are losses the economy cannot sustain because of how significant the textile industry is to Pakistan’s exports and overall GDP.
If efforts are not made to further textile exports to their maximum potential, the Pakistani economy is at risk of sinking deeper into debt. Local businesses and the textile industry cannot be neglected mainly because the textile industry is an export-oriented industry – which has the definite potential to promote immense sustainable economic growth. However, none of this can happen without essential policy support and exceptionally competitively priced energy. Furthermore, the implementation of the Textile Policy must be fast-tracked so that a comprehensive plan to propel textile exports can be set in motion.