Pakistan's textile industry is facing high energy cost pressure, more than 1500 textile mills closed as a result!
Date:
2023-12-29
As an important export sector, Pakistan's textile industry is facing insurmountable challenges such as high energy costs and currency devaluation, and its competitiveness in the global market is declining.
After a significant increase in natural gas rates from December 1, natural gas rates are expected to rise in the next few months, possibly as much as $13 or more per unit, in line with the RLNG rates announced by the regulator.
The rising cost of natural gas makes the local textile industry uncompetitive in international trade, and the unsatisfactory development also makes the export-oriented industry fall into the "22 army" situation where the cost of self-provided electricity exceeds the electricity price of the grid.
According to analysts, the cost of generating electricity from captive plants with such high gas bills has mostly exceeded dlrs 45 per kilowatt-hour, exceeding the utility price of electricity for today's industry. In this challenging development, only efficient plants with a cost of up to Rs 38 per unit of electricity can generate electricity at high RLNG tariffs. In recent years, only about 1/5 of the industry has installed efficient plants in Punjab.
An industry official said: "If you cannot produce internal electricity due to the high cost of power generation, you will also face infrequent grid power supply, which will reduce the efficiency of the manufacturing process."
"It will be difficult for the textile industry to secure a competitive and reliable source of energy in the coming months."
Although the government provides RLNG subsidies to the textile industry at a price of US $9.0 per million British thermal units, this rate is higher than the regional average in countries such as India, Bangladesh and Vietnam. This makes the country's exports less competitive. In addition, with the abolition of regional competitive tariffs, as well as the earlier implementation of the fixed tariff of 20 rupees/kWh and the cancellation now, the cost of electricity in the national grid has also doubled.
The disastrous consequences of high energy costs have forced many factory owners to close their businesses. At the end of last year, the All Pakistan Textile Mills Association (APTMA) reported that more than 1,500 textile units were forced to close due to rising electricity and gas prices.
One of the most critical aspects of this linkage is the disruption of electricity and gas supplies. The composites industry is largely dependent on an uninterrupted supply of electricity and natural gas. Disruptions in energy supply, reduced gas supply or low pressure have seriously undermined the efficiency of textile mills.
The country's textile industry has been at a disadvantage due to fierce regional competition in countries such as India, Bangladesh, Vietnam, Uzbekistan and Sri Lanka.
It is worth mentioning that natural gas is still the main or only energy source for 75% of the textile industry, and the textile industry only consumes about 8% of the national natural gas supply. Therefore, once the gas is stopped or unbearable costs are caused, it will seriously affect the local textile industry and export orders.
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SHANGHAI EAST YUEFA TEXTILE TECHNOLOGY CO., LTD
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Floor 5, Building 11, 6055 Jinhai Highway, Fengxian District, Shanghai
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