2023—All Pakistan Textile Mills Association (APTMA) called on the Minister of Commerce, Minister of Energy and Members of the Federal Board of Revenue today to discuss major challenges faced by the textile industry.
In their meeting with the Minister of Commerce, APTMA appreciated the Minister for his role in reigning in the exchange rate and controlling volatility.
The Ministers of Commerce, and Energy were made aware of energy issues faced by the
industry—specifically high power tariffs of 16 cents/kWh that are currently being charged
to the industry, and the uncertainty surrounding the availability and pricing of gas/RLNG.
The Ministers informed members that a solution was close to being found to ensure
availability of gas/RLNG for industry, and disparities in pricing were also being addressed.
APTMA expressed appreciation for this.
Regarding electricity-related issues faced by the textile industry, an agreeable solution is
still pending. As it stands, the textile industry has an export capacity of $2 billion per
month, of which $650 million worth of export industry is closed. If electricity prices for exporters continue to remain high, a growing number of firms will be forced towards
closure. This is evidenced by the 12 percent year on year decline in textile exports for
September 2023, while textile exports of our regional competitors, including India,
Bangladesh, and Vietnam, continue to increase.
Members of APTMA conveyed to the Ministers that current tariffs are unsustainable and
include a cross-subsidy of Rs. 10.85/kWh to non-productive sectors that cannot be
exported. Exports need to be made competitive to be able to match prices in the
international market. If textile firms continue to close, this will prove disastrous for the
overall economy. In addition to negative effects on the macroeconomy and Balance of
Payments, effects will also spillover to upstream sectors, including cotton.
By the Grace of Allah, Pakistan has been able to reverse the decline in cotton
production/productivity and a bumper crop is expected this year. This is primarily due to
the tremendous effort put in by the Punjab Government, especially CM Punjab, and
APTMA. One of the reasons for a better crop is that the farmers were promised a phutti
price of Rs. 8500/m. However, given the large-scale closure of industry, the price currently
stands at R. 7500/m. If current power tariffs prevail, further closure of industry will cause
cotton prices to plunge even further, with severe implications for vulnerable segments,
APTMA has proposed the following solutions in this regard:
. Create a winter tariff category for exporters and announce cost of service tariffs
(excluding stranded costs, distribution losses and cross-subsidies) to maintain
competitiveness across the country and internationally for the next 6 months.
- Wheeling B2B contracts with a wheeling/Use of System Charge of up to 1
cents/kWh, all inclusive excluding cross-subsidies and stranded costs. Allow
Hybrid Bulk Power Consumers (BPC) concept for both B2B and grid supply to bemaintained without any penalty on exit of BPCs from grid supply.
- 3. Raise the cap on solar net-metering for industrial consumers from 1MW up to 5MW. This will add 5,000 MW of solar energy at the point of usage, with no upfront investment or guarantees from the government. Discussions were held with FBR on delays in processing of sales tax refunds faced by several members, causing a liquidity crisis in the industry. It was conveyed to them that refunds for many industry taxpayers are pending and FASTER refunds to be issued within 72 hours are being inordinately delayed. Moreover, a large number of sales tax claims are being deferred by the FASTER system, which are not being processed by field officers. Refund claims against provincial sales tax invoices are also being rejected or deferred due to non-availability of automated verification of the provincial invoices, resulting in accumulation of refund of billions of rupees. FBR was also made aware of the need to include indirect exporters (i.e., upstream suppliers of exporting firms) in the FASTER system such that it applies to the entire textile value chain. FBR appreciated feedback provided by APTMA and ensured us of cooperation, and to find a timely and mutually agreeable solution to these problems. Moreover, APMTA ensured FBR of its cooperation to assist in FBR’s efforts to counter tax.