Textile Industry Struggles with $9 Billion Export Gap, Urges Competitive Energy Prices

The textile sector in Pakistan is facing significant challenges, with industry experts reporting that exports are falling short by $9 billion compared to the sector’s potential. Key players in the industry are calling for urgent reforms, particularly in energy pricing, which they say is neither financially viable nor competitive within the region.

A delegation from the All Pakistan Textile Mills Association (Aptma), led by Chairman Kamran Arshad, Chairman North Asad Shafi, and Chairman South Naveed Ahmed, recently met with Minister of State for Finance and Revenue, Ali Pervaiz Malik, and officials from the Federal Board of Revenue. The group discussed the key issues affecting the industry and urged the government to take corrective actions.

While the textile millers appreciated the government’s efforts in securing a $7 billion loan from the IMF to stabilise the economy, they expressed concern over the high cost of electricity, which remains around 15 cents per kWh. This is significantly higher than the 6-9 cents per kWh charged in regional competitors like India, Bangladesh, and Vietnam. Despite the government’s steps to reduce the cross-subsidy in industrial tariffs, the industry insists more needs to be done to make energy prices regionally competitive.

A critical issue discussed was the government’s agreement with the IMF to cut off gas supply to captive power plants (CPPs) in industrial units by December 2024. The textile industry, which relies heavily on gas-fired CPPs, fears that shifting to the national grid, which remains financially unviable, could force many mills to shut down or look for alternative energy sources. Aptma called on the government to reconsider this policy, stressing that such a move could severely damage the already struggling industry.

Another pressing issue was the withdrawal of the zero-rating facility, which provided sales tax exemptions for local supplies used in manufacturing export goods. Under the Export Facilitation Scheme, this exemption had helped exporters maintain liquidity. With an 18% sales tax now imposed on local supplies, businesses have shifted to imported raw materials, which are more expensive and further increase production costs. This policy shift has particularly hurt the spinning sector, which saw a 41% drop in yarn production by June 2024. Meanwhile, cotton yarn imports surged by 435% in August 2024, and over 40% of spinning units have shut down, leading to widespread unemployment.

Aptma also highlighted the growing misuse of the Export Facilitation Scheme, where yarn imported under the scheme for manufacturing exportable goods is being illegally sold in the domestic market. This malpractice is causing significant damage to the local textile industry.

The textile millers have urged the government to urgently address these issues to unlock the sector’s full potential and ensure its competitiveness in global markets.

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