FAISALABAD'S TEXTILE INDUSTRY IN TATTERS

TARIQ AHMED SAEEDI
(feedback@pgeconomist.com)

Dec 5 - 11, 20
11

Energy crisis is asphyxiating the Pakistan's textile lifeline in the country's third largest city of Faisalabad with public clamour against power outages at staggered intervals, gas load shedding, and spiking electricity and gas tariffs getting louder day by day.

The crisis is not new and has been lingering on the sputtering economy of Faisalabad for last three years or so. In summer, the situation was worst in the history. Come winter and the electricity shortages should have paled into insignificance, yet are compounded with gas load shedding.

So far, 200 of the city's 4,000 textile plants have been shut down because of the electricity outages, according to the chairman of council of power loom owners, Wahid Raamay.

Media reports said about 10 per cent of textile workforce have been retrenched. In its normal days, entire textile industry used to have 800,000 direct employees. Power loom owners are selling out their machines in scraps or plugging sparsely cost leakages to avert total collapse. Textile exporters are worried how they would be able to meet the international export commitments in the wake of holiday season in Pakistan's export destinations including European Union and US if things do not come back to the normal.

While holiday shopping season (November-December) is in its full bloom in western countries generating export orders worldwide, Pakistan's textile industry flounders to lay hands on its share in the global shopping spree.

Textile and clothing exports from Pakistan in October dropped 13 per cent to $1.02 billion from $1.18 billion a year ago, though July-Oct registered a three per cent growth at $4.20 billion compared with $4.07 billion earlier. Value-added sector is doubtful of achieving the textile export target set for 2011-12.

November and December are the busiest days for retailers in foreign markets, witnessing an average 2.6 per cent increase in holiday sales per year, for last 10 years in US, according to National Retail Federation (NRF), a Washington D.C.-based retail trade association.

In 2010, retailers ringed up stunning $452.9 billion sales by selling a wide range of consumer products in US alone. Clothing and clothing accessories fetched not less than $40 billion from American shopping enthusiasts. Pakistan's export sector may be champing at the bit of ginormous global retail activities this year too due to anaemic domestic economy.

Industrial inactions are feared to render a loss of two billion dollars to the Faisalabad's export-oriented textile industry.

Most of the textile units in Faisalabad are not operating six days a week for want of electricity and gas. Media reports said majority of them have to undergo stoppage for three days a week. By virtue of that, they are unable to meet the deadlines of delivering garments to their foreign clients. This will likely cause multibillion dollars loss to the industries that are said to give birth to 70 per cent of textile exports from the country.

On one hand, energy setbacks are inhibiting industrial production causing joblessness while rise in electricity and gas tariffs are rendering value-added sector uncompetitive in international markets by pushing up cost of production on the other.

Gas supply to value added sector remained suspended for 130 days up to now this year, according to the industrialists. They said 125 textile units made 10 million meters of cloth daily in Faisalabad.

Aptma officials said insufficient supplies of gas and electricity would result in steep slash in production, and that subsequently would lead to sharp clothing supply shortfall in future. Garments factories need to arrange fabrics from other sources. A cost effective substitute for them will be smuggled fabrics.

Apart from an implication, the situation will have on tax revenue that is already much less than the growing national expenditures, massive joblessness is already becoming a sobering issue with unemployed workers looking desperately for other sources of incomes to earn bread and butter for their families.

Moreover, business community is criticising both sui northern and sui southern gas companies at increasing gas tariffs by 14 per cent and 11 per cent per million cubic feet respectively. Able-bodied textile industry of Faisalabad has the potential to help the country to hit $25 billion textile exports.

Faisalabad has Gujranwala, Shiekupura, Shaiwal, and Toba Tek Singh as its neighbouring districts. Its population has exceeded 6.5 million heads. Its historical name Lyallpur is after Sir James Lyall, who was the governor of Punjab in pre-partition days. The city had emerged as the centre of agriculture activities including cotton ginning and wheat grinding. Over the years, however, Faisalabad has made its name in the textile industry and related manufacturing. It boasts of the country's largest manmade fibre making plant besides is recognized for its giant chemical industries.

Textile processing units are not the sole victim of gas suspension, fertilizer makers are also the complainants. Urea shortages are giving a way to imported substitutes that are pricey.

Unquestionably, a solution lies in bridging energy supply and demand gaps. Majority of the industries use gas as prime input of production. Therefore, the government has to speed up works on energy projects such as LNG terminals, gas import, and exploration and production.

If an industrial city is not fed with the required energy, its effect will be felt by the whole economy. Tattered textile industry of Faisalabad means sharp reduction in exports revenue and above all a dent to the domestic fabric economy. Further, that will make future mega projects like M3 Motorway futile. The government planned to construct a motorway linking Karachi, Faisalabad, and Gwadar. The M3 motorway can become a valuable addition to raise the status of the city as a trading gateway to and from southern and northern locations. Fortunately, Exim Bank of China has agreed to finance the motorway. Its chairman Li Ruogu apprised Pakistan's prime minister Yousuf Raza Gilani at a meeting in Beijing in May this year, that he would ask experts to formulate a feasibility study.