ENERGY: LIFELINE FOR TEXTILE SECTOR

NUSRAT KHURSHEDI
(feedback@pgeconomist.com)

Nov 19 - 25, 2012

It is estimated that due to energy shortages, the domestic textile industry is likely to miss its export target by $4 billion, including Christmas orders worth $1.5 billion, as exporters accepted 50 percent less orders due to non-availability of power and gas supply. Textile export target was projected to be $16 billion for the current year. On the other hand, around 40,000 power looms of different sizes have been closed due to energy crisis.

Pakistan's textile industry is going through one of the toughest period in decades. Earlier, global recession which has hit the global textile, later on, the high cost of production resulting from an instant rise in the energy costs and shortage of energy and gas supply, become the primary cause of concern for the industry. Depreciation of Pakistani rupee during last year's raised the cost of imported inputs. In addition, double digit inflation and high cost of financing has seriously affected the growth in the textile industry. Pakistan's textile exports have gone down during last three years as exporters cannot effectively market their products since buyers are not visiting Pakistan due to adverse travel advisory and it is getting more and more difficult for the exporters to travel abroad.

In summer season, as a consequence of load-shedding the textile production capacity of various sub-sectors has been reduced by up to 30 per cent. The load-shedding of electricity cause a rapid decrease in production which also reduced the export order. Because of excessive power outages Industrialists were finding it hard the timely completion of export orders. As a result, foreign buyers are diverting export orders to neighbouring countries, inflicting huge losses on the county's foreign exchange earnings. Last year more than 15-20 percent textile export orders of Pakistan were diverted to Bangladesh, India and Sri Lanka.

The cost of production has also risen due to instant increase in electricity tariff. Due to load shedding some mill owner uses alternative source of energy like generator which increase their cost of production further. Due to such dramatic situation the capability of competitiveness of this industry in international market effected badly. Pakistan right now, the fourth largest producer and third largest consumer of cotton but unfortunately now we are at number 12 in the international trade of textile products.

In winter, textile sector faced severe gas shortage. According to the sources, Textile sector is likely to face 700 MMCFD gas shortages against 500 MMCFD in the preceding year. Along this, pressure of the gas supply was "extremely low", for three working days, the gas pressure was between 1 and 1.5 psi for 6 to 8 hours, instead of the required 8 psi. Industries cannot be run on such low gas pressure, that's why breakdown occurred in production, which has been resulted in 25% to 30% less production. Side by side the Sui Northern Gas and Pipelines Limited had also reduced gas supply to the industry in Punjab to four days. By this 60 to 70 per cent of the industry had been affected and was unable to accept export orders coming in from around the globe. However, the net loss estimated that only in Punjab energy supply disruption was causing an estimated loss of Rs1 billion per day.

No doubt, that there are other factors like inflation and lack of investment which slow down the production capacity. The increase in inflation causes the increase in the cost of production of textile good which return in downsizing. Time to time double digit inflation causes reduction in exports of textile. Industry is also facing problem of Low productivity due to its obsolete textile machineries. However, to overcome this problem and to stand in competition, Pakistan Textile Industry will require high investments, which seems impossible as Pakistan is facing externally as well as internally problems which restricts the new investment. The unpredictable internal condition of Pakistan causes a rapid decrease in foreign investment that affected all industries but especially textile industry.

For the present unfortunate condition of textile sector, blame directly goes to government, because of government's negligence in realizing that the textile industry was being forced to operate at much below capacity because of gas and power shortages. The only solution for the textile sector is open supply of gas and electricity.

Government should realize that Energy self-sufficiency is an important variable in a country's economic development. Achieving Self-sufficiency in electricity and gas supply to the industry and home consumers is very important for national economic development and for avoiding further political turmoil. Energy means ability to do work. We are in the age in which science is doing what magic cannot do. With the help of science, nations are focusing to do more against less to sustain their economy and also compete in the international market.

Just look at the case of India, which is both a major energy producer and a consumer. India currently ranks as the world's seventh largest energy producer, accounting for about 2.49% of the world's total annual energy production. On the contrary, Pakistan (the seventh nuclear power in the world) the situation is totally adverse. Regardless of important resources to producing energy like coal, natural gas, oil, wind, solar, hydel, but, the overall result is that we are facing 4500MW - 7000MW electricity shortfall. Despite a wealth of natural resources, Pakistan produces only 80 percent of its electricity needs and even some of that comes from imported fuel.

Time to time, government announced relief packages for textile sector but in terms of implementation Lack of political will, bad governance and administrative inabilities worsen the crisis. Even Bangladesh, which did not have any export of textile and clothing up to year 1990, is now exporting more than Pakistan whose exports are staggering around $11 billion only, took measures for the survival of its textile industry.

It's a high time that government take necessary steps because textile sector represents the longest agro-manufacturing value chain starting from seed, natural fiber, synthetic fiber, yarn, greige fabric, processed fabric, garments, made-ups and high value added brands, directly and indirectly source of major employment.