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FAISALABAD: Extreme cash flow problems and high production costs have greatly damaged the prospects for growth in exports and adversely impacted the textile industry. Exports are declining consistently both in value and quantities. The government’s immediate intervention is needed to check the drastic decline in exports.
In a statement, the leadership of Pakistan Textile Exporters Association (PTEA) termed severe liquidity crunch and high production costs as major causes of decline in exports. They appealed to the government to rescue the ailing textile industry.
Massive working capital of textile exporters has been held up in sales tax, income tax, provincial sales tax refund regime, increasing the financial stress as the textile exporters are unable to enhance their exports turnover. The working capital requirements have significantly increased due to exchange rate adjustments.
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Furthermore, they said that despite firm commitment of ensuring its completion within 72 hours, the processing of sales tax refund claims under FASTER system has been delayed for a month. The processing of regular and deferred sales tax refund claims has also been suspended for over a month.
The situation has been further complicated as the initiatives announced in textile policies under incremental exports scheme (DLTL), Markup Support and technology upgradation fund scheme are still unpaid. Ready for payment DLTL claims have also been stopped.
All this is having an adverse impact on the employment and the economy of the country. Lack of basic working capital has been a cause of serious concern for exporters and a major setback to the industry, they said. The government should set its priorities right and accord preferential treatment to boost exports and generate industrial activities.
Describing high cost of production as another major issue, the PTEA is of the view that abrupt policy reversals are immensely damaging the pace of exports. Withdrawal of Regionally Competitive Energy Tariffs (RCET) will turn out to be hugely disastrous for the Punjab-based textile industry, which is already facing the problem of non-viability within the country.
The withdrawal of RCET for electricity at Rs19.99/ kWh will render the textile industry, especially in Punjab, uncompetitive within the country as well as the region. Difference between electricity prices in Punjab and Sindh is more than 3.65 times as EOUs in Sindh can generate electricity at Rs11/ kWh from gas being provided at $4/ MMBtu while Punjab gets RLNG at $9/ MMBtu.
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Industries in Sindh are using low-priced gas for their industrial needs, whereas highest revenue-generating Punjab-based industries are compelled to use high-cost RLNG for their production, which is an injustice.
The government must take cognisance of the serious matter and step up to save Punjab-based industry from disaster as high energy cost is holding it back from realising its full potential. This is all the more needed given the uncertain economic conditions prevailing in the country, they added.
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The government should encourage export and export-oriented sectors to have long-term sustainability in balance of payments. Textile exports witnessed a massive increase of over 55 percent from $12.5 billion in FY 2020 to $19.5 billion in FY 2022 as a direct consequence of the competitive energy tariff.
They urged the government to implement the Weighted Average Cost of Gas (WACOG), the only workable solution that allows the creation of a combined and logical gas market.
The government must take cognisance of the serious matter to safeguard the country’s exports and employment. The textile industry is the only hope for revival of the country’s economy which is currently jolted by high cost of doing business.
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