March 07, 2024 (MLN): In response to the escalating gas tariffs, the Southern Zone of the All Pakistan Textile Mills Association (APTMA) has strongly rejected the 3.23x hike witnessed over the past year, as expressed during the Extraordinary General Body Meeting of APTMA hold on Thursday.
APTMA termed it as detrimental for the export oriented textile industry of Pakistan, said a press release issued today.
The meeting observed that the recent increase in gas tariff has proven to be disastrous for the export oriented textile industry which has the largest share of 60% in total exports of the country.
Due to increase of 3.23x in gas tariff, the export oriented textile industry is becoming uncompetitive in the international market and is compelled to shut down due to the unbearable and unsustainable financial losses emanating from unprecedented cost of doing business.
This is primarily due to highest ever interest rate of 22% and an astronomical increase in energy prices, which has made Pakistani exporters uncompetitive in the export markets by a large margin.
APTMA said gas tariff stood at Rs852 per MMBTU until December 31, 2022.
Subsequently, it surged to Rs1,100 per MMBTU from January 01, 2023, then escalated to Rs2,400 per MMBTU in November 2023, and as of February 01, 2024, it has been further increased to Rs2,750 per MMBTU.
This amounts to an overall rise of Rs1,892 per MMBTU or a staggering 3.23x within a year.
The meeting also observed that the electricity supplying companies in Sindh and Baluchistan like KElectric and HESCO do not have the capacity and capability to provide required load of uninterrupted electricity to the industry, therefore industries of the two provinces are compelled to use their gas based power plants for generation of electricity to operate their mills without any interruption.
Presently the government is trying to encourage the use of grid electricity instead of electricity produced by gas based power generation, without realizing that this policy is not implementable in Sindh and Baluchistan due to poor capacity and supply of grid electricity.
This policy instead of resulting in increase of grid electricity consumption is going to result only in closure of mills.
Chairman of APTMA Southern Zone Region Zahid Mazhar said that due to this substantial 3.23x increase in gas tariff in one year, there is a capacity closure of 30% firms in the textiles and apparel sector and rest are at high risk of total closure over the coming weeks due to becoming uncompetitive in the international market as compared to the regional competitors like India, Bangladesh and Vietnam.
The export capacity of $600 million/month of textile industry of the country remains unutilized, mainly due to the high energy cost as we cannot export inflation, he added.
Zahid Mazhar further said that the export oriented textile industry is dying fast and Pakistan is losing market share in the global marketplace due to the alarming rise in Energy Tariff.
The industry is being provided grid electricity at Rs52/kWh i.e. 18 cents/kWh, which is more than double of what the competing countries are charging from their industry.
In addition the gas/RLNG rates for the textile sector are much higher i.e. over $12MMBTU as compared to the regional competing countries like India at $6.5/MMBTU, Bangladesh at $7.5/MMBTU, and Vietnam at $9.80/MMBTU.
He said that the overall hike in gas tariff is 3.64x as the industries of Sindh and Baluchistan are forced to take RLNG instead of indigenous gas at the ratio of 40% of RLNG due to which the cost of gas has risen from Rs852 per MMBTU till December 31, 2022 to Rs3,100 per MMBTU resultantly the cost of production has also increased tremendously which is beyond the limit of absorption by the industries of two provinces.
He pointed out that the Supreme Court of Pakistan has declared that gas based power plants of the industries producing energy for consumption of their own mills as industry instead of Captive but the government is creating discrimination and not treating them as industry and their gas tariff is fixed at Rs600/MMBTU or 27.91% higher than that of industry.
In addition there is a discrimination in blended gas ratio i.e. 80:20 for general industry whereas for captive power plants the blended gas ratio is 60:40.
Zahid Mazhar further said that the industries of Sindh and Baluchistan are asked to take RLNG instead of indigenous gas to run their mills even though the two provinces are producing about 85% of the natural gas produced in the country which is against the spirit of the Article 158 of the Constitution of Pakistan according to which “the Province in which a well-head of natural gas is situated shall have precedence over other parts of Pakistan in meeting the requirements from the well-head”.
APTMA demanded the federal government to reverse its decision of astronomical increase in gas tariff to make textile exports competitive in the international market which is being continuously eroded by surge in energy prices during last one year.
The meeting further demanded that the industry and their power generation be declared first priority in supply of gas if the government is interested to achieve its target of earning foreign exchange of $50 billion through exports which is the need of the hour.
He requested the SIFC and the newly elected government to take notice of the above issues and review the policy regarding gas and electricity.
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Posted on: 2024-03-07T17:03:21+05:00
