The textile industry in Pakistan continues to suffer from chronic energy shortages, threatening its ability to fully capitalize on the preferential trade status it was recently granted by the European Union (E.U.).
The energy situation in Punjab has become dire, prompting the Lahore Chamber of Commerce and Industry (LCCI) to petition the government for emergency assistance, requesting that the industrial sector in Punjab be supplied with natural gas.
S.M. Tanveer, chairman of Aptma Punjab, said, “The Punjab-based textile industry is confronted with a serious challenge of sustainability on account of energy shortage, particularly gas supply, which is not being provided with according to requirement.” He continued, “This situation is resulting in large scale closure of textile mills in Punjab.”
Energy shortages have long been a drag on Pakistan’s promising apparel and textile manufacturing sector but, recently, there have been positive signs of improvement. Chronic energy shortages often undermine manufacturing across the nation, especially in Punjab, where many of the captive power plants are expected to be deprived of natural gas for the duration of the winter season. And more than 50 percent of the factories in Faisalabad have been shut down due to electricity shortages.
Despite the progressive growth of its textile industry, Pakistan’s faltering energy sector has been a ceiling on growth. A steep rise in gas and electricity prices will likely consume much of the additional revenue textile exportation produces. The gas tariff for captive power plants has risen by 17.4% and electricity rates for industrial units has skyrocketed 57 percent in recent months. And Pakistan’s stalwart regional competitor, India, is anticipating a big year as well, forecasting $17 billion in textile exports.
Many believe Pakistan is redoubling its efforts to improve energy supply to ensure that it can properly capitalize on its new status under the E.U.’s Generalized System of Preferences (GSP Plus). Now, more than 20 percent of Pakistan’s exports will enter the E.U. market tariff-free, and more than 70 percent will enjoy dramatically reduced tariffs.
Sheikh Mohammad Ilyas, chairman of the Pakistan Textile Exporters Association (PTEA), said, “The EU trade concessions can push our textile exports and generate significant economic activity. But much will depend on regular availability of regular supply of gas and electricity to operate factories.” An estimated 40 percent of Punjab’s textile manufacturing capacity is expected to be stymied by the gas shortages. This is especially worrisome since nearly 80 percent of the industry’s overall capacity is located in Punjab.
The stakes are unusually high for Pakistan given the great significance of the E.U. as a trading partner. Thirteen textile products are included on the list of those than can be exported duty free to the 27 members of the E.U., accountable for $231 million worth of goods last year. Some are predicting this will increase Pakistan’s E.U. exports by $1 billion.
Pakistan’s government has made substantial efforts to remedy the longstanding problem of energy shortages and service disruptions. For the first time ever, the government made preparations in advance of the winter season in expectation of energy supply problems. Tanveer hypothesized that Pakistan’s textile industry could earn as much as an additional $3 billion in revenue annually if its ongoing energy crisis could be resolved.
However, some contend that not enough has been done to assist Punjab, in particular, the geographic fulcrum of Pakistan’s textile manufacturing sector. Sohail Lashari, president of the LCCI, complained that the industry in Punjab not only generates considerable revenue for the government, but is also an important source of employment.