Pakistan’s textile sector is facing the looming risk of increased export downturns due to lack of an economically sustainable energy supply. During a recent presentation to the Special Investment Facilitation Council (SIFC), members of All Pakistan Textile Mills Association (APTMA) underscored the critical need for a sustainable energy source to support manufacturing and foster international competitiveness. The association’s members emphasised the need to remove cross-subsidies to non-productive sectors to achieve the goal. Meanwhile, talking to WealthPK, Mian Muhammad Alamgir Jamil Khan, a member of APTMA, said the association had proposed to the SIFC to activate the Competitive Trading Bilateral Contracts Market (CTBCM), facilitating business-to-business power contracts with a use of system/wheeling charge set at 1-1.5 cents per kilowatt-hour (kWh).

He further said that the initiative, excluding cross-subsidies and stranded costs, aimed to empower the industry to procure green energy at competitive end-use prices through various sources such as geothermal plants in depleted oil fields, hybrid solar/wind plants, or other green power producers. Additionally, he said the association called for a significant increase in the cap on solar net metering for industrial consumers, elevating it from 1MW to 5MW. “This strategic move is designed to expedite the transition toward net zero by introducing over 3,000MW of clean energy at the point of usage, without requiring government investment or guarantees. “The proposed measures seek to incentivise a shift away from captive gas generation, thereby freeing up domestic gas resources and mitigating the impact on the Re-Gasified Liquefied Natural Gas (RLNG) import bill,” he said.

“APTMA has further requested the assurance of adequate gas supply to cogeneration units, treating them as industrial consumers, considering their efficiency of over 60% and the utilisation of gas for steam and hot water-related processes, in addition to power generation,” he emphasised. Jamil said that the backdrop of this industry plea was the notable shift in power tariffs for export-oriented firms. “In the fiscal year 2021-22, the export sector enjoyed regionally competitive energy tariffs (RCET) of 9 cents/kWh, propelling textiles and apparel exports to $19.3 billion from $12.5 billion in FY20. However, a subsequent surge in power tariffs to over 14 cents/kWh resulted in an export decline to $16.5 billion in FY23,” the APTMA member said.

Speaking to WealthPK, Zahid Anwar, another member of APTMA, highlighted that industrial consumers were grappling with an additional increase in power tariffs, which reached approximately 17.5 cents/kWh (Rs46/kWh). “Factors contributing to this hike include quarterly tariff adjustments (QTA), a fuel price adjustment (FPA) of Rs7.056/kWh for January 2024, and expectations of higher QTAs in upcoming quarters due to declining power consumption.” He added that the elevated power tariffs surpassed the averages in regional economies such as Bangladesh (8.6 cents/kWh), India (average of 10.3 cents/kWh; 6 cents/kWh for textile and apparel firms in Maharashtra), and Vietnam (7.2 cents/kWh), making local production financially unfeasible.

Moreover, he said gas prices for industrial consumers had surged to Rs2,750mmBtu, marking a staggering 223% increase since January 2023. “This spike has rendered captive generation financially unviable for a significant portion of the industry, which previously relied on it in the absence of competitively priced grid electricity.” Consequently, Anwar said textiles and apparel exports were languishing at around $1.4 billion per month, a significant $600 million below the installed capacity of $2 billion/month. “The approximately $5 billion invested during the RCET period in upgrading/expanding manufacturing capacity now sits idle, adversely impacting investor returns, sentiment and overall confidence in the economy.”

Credit: Independent News Pakistan (INP)