ISLAMABAD: The incre-ased dependency of textile sector on imported inputs including raw materials, cotton, yarn, fuel and machinery/equipments has added to the cost of production and in such circumstances depreciation of local currency would further hurt the industry instead of providing it any meaningful relief.

This was the consensus of industry stakeholders and economists while talking to Business Recorder.

The exporters may get some relief in the short term from devaluation of the local currency, but it will not result in a corresponding increase in exports due to higher cost of imported inputs. According to textile division data, Pakistan’s textile exports were $12.45 billion and imports $3.35 billion in 2016-17. The country exported raw cotton amounting to $42.85 million, cotton yarn $1.24 billion, cotton cloth $2.12 billion, cotton carded $235000, yarn other than cotton yarn $24.351 million, knitwear $2.362 billion, bed wear $2.133 billion, towels $786.606 million, canvas and tarpaulin $133.853 million, and readymade garments $2.316 billion in 2016-17.

Pakistan imports on average about 2.5 million bales of cotton for $850 million per annum as raw material due to cotton shortfall in the country. The country also imports around 3-4 million synthetic fiber worth $500 million as it is not produced locally and other textile items of $1.5 billion. Further the country imports synthetic and artificial silk of around $700 million and worn clothing of around $150 million. Besides this to meet industry requirements, textile industry imports machinery of around $500 million per annum.

Energy used by the textile sector as input is based on imported oil, coal and gas which further adds to total production costs. In this scenario any depreciation of the rupee will increase the costs of production manifold and may hurt the high value adding textile exports.

Textiles industry consists of 11.3 million spindles, 3 million rotors, 350,000 power looms, 18,000 knitting machines and processing capacity of 5.2 billion sq m. It has 700,000 industrial and domestic stitching machines. There are 21 filament yarn units with capacity of 100,000 tons. Thus a complete textiles value chain exists in the country which is rare in the world, unlike many competitors which have only primary base or the finished base.

As per the official data, All Pakistan Textile Mills Association (APTMA) is the major trade association of textile spinning, weaving, and composite mills representing the organized sector in Pakistan. APTMA represents 396 textile mills out of which 315 are spinning, 44 weaving and 37 composite units. The total installed capacity of APTMA member mills accounts for 9,661,366 spindles, 61,608 rotors, 10,452 shuttleless/airjet looms and 1897 conventional looms. The association’s members produce spun and open-end yarn, grey, printed dyed fabrics and bed linen.

Ashfaq Hasan Khan, former economic adviser to Finance Ministry said that currency adjustment should be the last resort of the government as it would increase input costs of the export-oriented sectors. He said that dependency on imported contents has increased and depreciation would further hurt the industrial sectors. The government should first review taxation policy, reduce utilities tariffs including power, gas and water prices and immediately pay the stuck-up refunds of exporters to boost exports.

Textile industry sources told Business Recorder that about 35 percent production capacity of textile value chain is impaired/closed while prospective investors are reluctant to make new investment decisions due to high cost of doing business.

Energy cost is more than 30 percent of the total conversion cost in spinning, weaving and processing industries. Industrial gas tariff in Pakistan is 100 percent whereas electricity tariff is about 50 percent higher than the regional competitors. Pakistan textile share in global market declined from 2.2 percent to 1.7 percent and unemployment increased by 30 percent, sources added.

The exporters raised serious concerns over decline in exports and termed high cost of doing business including energy prices, non-payment of refunds claims as well as overvalued rupee as major factors making them uncompetitive. They further said that 30-40 percent factories have closed down while others are on the verge of collapse due to high input cost.

APTMA officials said electricity is available at Rs 10.5/kwh for the industry in Pakistan as compared to Rs 7/kwh in other regional countries including Bangladesh. Further, gas is available at Rs 1,000 /MMBTU in Pakistan against Rs 400 in Bangladesh. In such circumstances the industry cannot compete in the international market and hence is losing customers, they added.

Industry is burdened with Rs 3.63/kwh surcharges on electricity and GIDC on gas which cannot be passed on to international buyers. The textile industry demanded immediate reduction in electricity tariff to Rs 7/kwh without levy of surcharges. Textile industry can not pass on system inefficiencies to its international buyers, sources in the textile sector maintained.

Chairman APTMA Amir Fayaz said that around Rs 200 billion of the textile industry is stuck up with the government under sales tax, duty drawbacks etc and is creating severe liquidity crunch for the industry.

“If we cannot buy raw materials due to liquidity crunch, how will we make investment in product diversification and increase exports”, said Fayaz adding that serious liquidity crunch is negatively affecting production capacity and resulting in a steady decline in the country’s exports.

APTMA group leader Gohar Ijaz said that 150 textile mills have closed during last one year, rendering thousands of people jobless due to high input cost including gas and electricity prices and stuck up refunds claims. Ijaz said that industry would not be able to perform any more under such circumstances.