ISLAMABAD: The All Pakistan Textile Mills Association (APTMA) has demanded that the government chalk out a long-term Regionally Competitive Energy Tariff (RCET) plan for the textile sector to keep the export momentum going.
“There should be a long-term Regionally Competitive Energy Tariff policy for the textile sector instead of reviewing the energy prices after every few months,” Secretary General of APTMA Shahid Sattar told WealthPK.
He said a long-term tariff policy was necessary for sustaining growth in exports and employment and bringing in new investment.
Sattar said electricity tariff above 7.5 cents/kWh was not competitive, particularly within the region, and it should stay at 7.5 cents/kWh tariff for electricity along with $6.5/MMBTU for gas and Regasified Liquefied Natural Gas (RLNG).
“Revising energy tariff after short period of time not only shakes the investors’ confidence, but also results in reduction of exports,” Sattar noted.
Sattar said the textile industry, through the RCET, had achieved export maximization, job creation and investment and Pakistan’s exports witnessed an extraordinary growth during the first eight months of the current fiscal year.
“The industrial electricity tariff of regional competitors is still lower than in Pakistan,” he said, adding that the objective to become an export powerhouse could not be achieved until power tariffs remained at a competitive and stable level.
Industry fears that the power sector will not be able to deliver on a sustained stable and competitive basis which will negatively impact exports, said the APTMA secretary general.
According to a report of Pakistan Institute of Development Economics (PIDE),
the sector contributes around 60% of the total export earnings and provides employment opportunities for around 40% of the total labour force.
Although the substantial export earnings of Pakistan are based on textile products, its share in the international textile exports is considerably low.
Out of a total of $792 billion of textile exports, Pakistan contributes just 1.7%.
According to the PIDE report, energy cost is the leading component in terms of conversion cost in textile sector. Among all the factors that can make the textile sector regionally uncompetitive, energy tariff is at the core.
The recent outshining performance of the textile sector can partially be attributed to the RCET policy that the government has adopted since late 2018, the report says.
PIDE estimates show that a 10% increase in the energy tariff causes a 1.1% decrease in investment within the textile sector of Pakistan.
Similarly, the semi-elasticity of employment to the energy and power indicates that a 10% increase in the energy tariff makes a firm lay off 62 employees on average. Since the number of textile units is around 521, hence a 10% energy tariff increment will bring a loss of 32,302 employment opportunities.
The PIDE analysis also indicates that around 75% of textile units undertake new investment initiatives when the energy tariffs fall. Moreover, the textile sector has received approximately $1.60 billion in investment during the first half of the current fiscal year.
These overwhelming loan demands for new investment from the textile sector are partially due to competitive energy tariff rates and partially due to concessionary mark-ups.
INP
