APTMA
ISLAMABAD: During a meeting with the Ministers of Commerce and Energy Division, the All Pakistan Textile Mills Association (APTMA) stressed that the current tariffs in the textile industry are unsustainable. The Association warned that if the tariffs persisted, it could lead to further closures of textile mills. This scenario would also cause a significant drop in cotton prices.
This, in turn, would have severe repercussions for vulnerable segments, including farmers.
During the meeting, the representatives of APTMA informed the Ministers of Commerce and Energy about the energy challenges faced by the industry. They talked about the high power tariffs of 16 cents/kWh currently imposed on the industry. There is also uncertainty surrounding the availability and pricing of gas/RLNG.
The Ministers assured APTMA members that efforts are underway to address the availability of gas/RLNG for the industry, and pricing disparities were being addressed, which was appreciated by APTMA.
However, a resolution for the electricity-related issues faced by the textile industry is still pending.
Currently, the textile industry has an export capacity of $2 billion per month, but $650 million worth of export industry is currently closed. If electricity prices for exporters remain high, more firms may be forced to shut down.
This is evident in the 12% year-on-year decline in textile exports for September 2023. Whereas, the textile exports of APTMA’s four regional competitors, including India, Bangladesh, and Vietnam, continue to rise.
APTMA members emphasized to the Ministers that the current tariffs are unsustainable and include a cross-subsidy of Rs10.85/kWh to non-productive sectors that cannot be exported. To remain competitive in the international market, exports need to be made more competitive.
The closure of textile firms would not only impact the macroeconomy and the Balance of Payments but would also affect upstream sectors, including cotton.
Pakistan has managed to reverse the decline in cotton production/productivity, with a bumper crop expected this year, thanks to efforts by the Punjab Government and APTMA.
However, due to the industry’s closure, the price offered to farmers has dropped from the promised Rs8,500/m to Rs7,500/m.
APTMA proposed the following solutions:
- Create a winter tariff category for exporters and announce cost-of-service tariffs (excluding stranded costs, distribution losses, and cross-subsidies) for the next 6 months to maintain competitiveness.
- Allow wheeling B2B contracts with a wheeling/Use of System Charge of up to 1 cent/kWh, excluding cross-subsidies and stranded costs. Maintain the Hybrid Bulk Power Consumers (BPC) concept for both B2B and grid supply without penalties for BPCs exiting grid supply.
- Increase the cap on solar net-metering for industrial consumers from 1MW to 5MW, adding 5,000 MW of solar energy at the point of usage with no upfront government guarantees.
Additionally, discussions were held with the Federal Board of Revenue (FBR) regarding delays in processing sales tax refunds, which have caused liquidity issues in the industry. APTMA conveyed that refunds for many industry taxpayers are pending and that faster refunds, promised within 72 hours, are being significantly delayed.
Moreover, sales tax claims against provincial invoices are being rejected or deferred due to the non-availability of automated verification of provincial invoices, leading to the accumulation of refund amounts worth billions of rupees.
