EDITORIAL: #Pakistan - Shocks to textile sector

Pakistan’s continuous struggle for increase in exports is often marred by inconsistent government policies, mostly about taxes. Export-oriented sectors have faced increase in power tariff by 35 per cent, impacting industries’ competitiveness and investor confidence. Industry is demanding the withdrawal of a Power Division’s notification issued on January 13, 2020 directing the power distribution companies to include additional charges like financial cost surcharge, Neelum-Jhelum Surcharge, taxes, fixed charges, quarterly tariff adjustment and fuel price adjustment, in addition to 7.5 cents to power bills to the industries entitled for zero-rated tariff.

All Pakistan Textile Mills Association (APTMA) censured the Power Division’s notification, saying the government had taken U-turns on its commitment to provide electricity to export industry at a fixed rate of 7.5 cents per unit to compete in the global market with India, Bangladesh and others. There is confusion on the notification of the Power Division, as its officials say that all committed concessions are in place as only the subsidy to exports sector was allowed to the extent of ‘base tariff’ and other factors and surcharges would have to be borne by the industry.

The Power Division, led by Energy Minister Omar Ayub Khan, issued a notification on February 8, 2019 that under an Economic Coordination Committee decision, zero-rated industry would be charged 7.5 cents per unit only and all other elements such as financial cost surcharge, Neelum-Jhelum Surcharge, taxes, fixed charges, quarterly tariff adjustment and fuel price adjustment would not be charged to them but would be part of the subsidy claim to be picked up by the government. The decision was dubbed as a game-changer by the industry and stakeholders. The textile industry set a target of $26 billion exports by 2023. The recent power shock, however, shook exporter confidence.

Apart from APTMA, Pakistan Business Council has also shown its anger on the power shock. “Policy U-turns, especially with retrospective effect do not bode well for export competitiveness, import substitution, investment or employment”, the PBC said, adding all these factors were critical for Pakistan’s economy. “How are Pakistan’s exports when subjected to 13 cents/KWh expected to compete with those from India and Bangladesh at 7-9 cents/KWh and China between 7.5-10 cents/KWh”. The government needs to evaluate its budgetary constraints before granting concessions to industries. Now, both sides should sit together to talk out the issue. If there is misunderstanding on the notification that can be handled, but if the notification swells mills’ power bills that issue should be addressed.

https://dailytimes.com.pk/545820/shocks-to-textile-sector/