Rising energy prices leave textile sector high and dry: WealthPK


FAISALABAD: The textile sector serves as the mainstay of Pakistan’s economy, fetching billions of dollars of the much-needed forex and providing jobs to millions of people. However, this sector is struggling for survival due to the surging prices of gas and electricity, reports WealthPK.

This situation has landed the businessmen attached to the textile sector in an outlandish situation where they are finding it hard to benefit from the US dollar’s depreciation.
On October 23, the Economic Coordination Committee of the Cabinet approved a 194 percent hike in the natural gas price. The new rate will be applicable from November 1.
Just before the first IMF review under the $3 billion short-term loan programme, the caretaker government approved the new gas prices. This is the second increase in 10 months.
Talking to WealthPK, former chairman of the Pakistan Hosiery Manufacturers and Exporters Association (PHMA) Haji Salamat Ali said it is not possible for any businessman to devise a business strategy in the given circumstances where the prices of utilities are not stable.
He said the exporters are bearing the brunt of high cost of doing business, as the recent increase in the prices of gas makes it difficult for textile exporters to compete with their business rivals internationally.
He contrasted the support that India and Bangladesh gave to their exporters with the lack of assistance in Pakistan, which he said would harm our economy.
“I am not in a position to quote rates to my international buyers due to uncertainty where nobody knows what will be the rate of electricity and gas after one month when we will go to materialize the export deal,” he categorically stated.
In March last year, he said, the government withdrew the regionally competitive energy tariffs due to which the textile sector could use only 50 percent resources for production leading to a decline in exports from $19.3 billion in FY22 to $16.5 billion in FY23.
The revised gas tariff will affect every segment of the society, as the fixed monthly charges for domestic protected consumers will rise from Rs10 to Rs400. The non-protected consumers will face two slabs as the first category, up to 1.5 hm3 (cubic hectometre), will see an increase from Rs460 to Rs1,000 and second category, above 1.5 hm3, from Rs460 to Rs2,000.
The export industries tariff increased 86pc to Rs2,050MMBTU, while non-export industries tariff increased by 117pc to Rs2,600.
Haji Salamat lamented that the millers could not take advantage of the dollar’s fall due to the rising costs of gas, electricity, and wages. He wondered how they would cope with the raw material prices and meet their international obligations. He predicted a bleak future for the industry.
An official of the Petroleum Division said due to the IMF conditions attached to the loan program, Pakistan has no option but to increase the tariff so that the lender could release the second tranche of $700 million.
We are aware of what sort of situation our economy would face but we have to go a long way to put the economy on the track back, he said.
When asked how the economy will be put on the track when the industrialists will not be in a position to run their factories, he said it’s a trying period and we have to struggle a lot to avoid bankruptcy.
However, Aftab Ahmed, a textile dyeing unit owner, challenged the energy sector official’s version. He said they were making decisions without knowing the actual situation, putting the millers’ livelihoods at risk.
How could we run our factories with a massive increase in the gas tariff, which would ultimately lead to closure of the factories and aggravate?” he asked.
He said, “We had come to know that the PDM government had to decide the gas prices; however, they technically left that decision for the interim government. And everybody knows that none of the caretaker governments will strive to ensure effective cost of doing business as they have no role in the politics in future.”
Deciding gas prices is a sensitive task which will play a crucial role in hitting the economy and labour as well, he said, adding that it is the responsibility of the political government to plead the case before the IMF for a favourable outcome.
“Now we are being told that two gas regulatory companies – SSGC and SNGPL – are facing a Rs46 billion deficit for the period from July to September. This shows the inefficiency of the two companies’ officials who failed to perform well, but its irony that the burden of their negligence is being passed on to businesses and the general public as well,” he deplored.
He said the surging prices of gas and electricity are hitting the production costs and undermining profitability.
Last Monday, the interim government endorsed the gas prices suggested by OGRA, upsetting the millers who hoped for some relief.
“We were expecting that the interim government would announce relief for the industry and the general public as well; however, they showed no mercy for us and approved the gas prices,” Salamat Ali said, adding that it would be the last nail in the coffin of the business community which was already facing numerous challenges to keep their business cycle running. –INP