Textile exports are limited by high costs.

 

March shipments increased merely 3% to $1.3 billion as exports lost their competitiveness.

 

ISLAMABAD

    All Pakistan Textile Mills Association (Aptma) provisional data shows that Pakistan's textile exports increased by 3% to $1.3 billion in March 2024 compared to the same month the previous year. In March of the previous year, textile producers exported $1.26 billion worth of goods. Textile shipments showed a decline of about 8% in March 2024 when compared to exports of $1.41 billion in February 2024.

    Compared to the previous year, exports have increased for four months running. In general, the textile industry's exports have decreased by 0.3%, or $0.04 billion, to $12.44 billion in the first nine months of the current fiscal year, but they have remained stable overall. Industry officials blame the drop on textile manufacturers' input costs rising dramatically, rendering exports uncompetitive on the global market.

    The Special Investment Facilitation Council (SIFC) has already received a warning from the textile industry about the possibility of further shipments declining in the absence of financially sustainable energy sources. It made clear that one of the biggest barriers to the industry's ability to maintain manufacturing operations and compete globally was the absence of a competitive energy source.

    The uniform tariff has increased by Rs2.7492 per kWh, meaning that consumers will have to pay an extra Rs85.2 billion for the second quarter of FY24, according to a recent notification from the power sector regulator.

    The textile industry is concerned that because of the high cost of inputs, the recent increase in power tariff will further hurt exports. The average tariff that rival companies in regional economies like Bangladesh (8.6 cents/kWh), India (average 10.3 cents/kWh and 6 cents/kWh for textile and apparel firms in Maharashtra), and Vietnam (7.2 cents/kWh) pay for electricity is more than twice as high as what Pakistan's textile industry pays.

    Additionally, since January 2023, the price of gas for industrial users has increased by 223% to Rs 2,750 per million British thermal units (mmBtu). The financial sustainability of industrial units' captive power generating plants, which make up a sizable portion of the industry, has been harmed by this.

    The Competitive Trading Bilateral Contracts Market (CTBCM) model is required for business-to-business (B2B) electricity supply contracts with a use-of-system/wheeling charge of 1-1.5 cents per kWh, excluding cross-subsidies and stranded costs. This is according to the textile millers' association, Aptma.

    In order to enable the industry to acquire green energy at competitive end-user prices, captive power generation from hybrid solar-wind plants, geothermal plants in depleted oil fields, and other green energy producers is the goal of the demand.

 

    Prior to this, February saw a 20% increase in textile exports when compared to $1.18 billion in shipments during the same month the previous year. But compared to $1.46 billion in January, textile exports fell more than 3% in February on a month-over-month basis.

 

 

    Exporters enjoyed a regionally competitive energy tariff of 9 cents per kilowatt-hour (kWh) in financial year 2021-22, which resulted in a record growth of 54% in textile and apparel exports, $19.3 billion in FY22 compared to $12.5 billion in FY20. However, the power tariff for export-focused firms was later increased to over 14 cents per kWh, leading to a decline in textile and apparel exports to $16.5 billion in FY23.

 

    Because of fuel price adjustments of Rs7.056 per kWh starting in January 2024 and quarterly tariff adjustments caused by declining power consumption, industrial customers' electricity prices have increased from 14 cents per kWh to roughly 17.5 cents (Rs46).

 

 

    As a result, exports of clothing and textiles have stagnated at about $1.4 billion monthly, $600 million less than the $2 billion monthly installed capacity.

 

    Additionally, the textile industry has called for increasing the ceiling on solar net-metering for industrial consumers from 1 megawatt to 5MW in a bid to facilitate the transition towards net-zero emissions by adding over 3,000MW of clean energy at the point of consumption, with no investment or guarantee from the government.