The Pakistan Textile Council (PTC) has issued an urgent appeal to the Federal Minister for Finance and Revenue, Mr. Muhammad Aurangzeb, emphasizing the critical need for immediate policy intervention to prevent the collapse of Pakistan’s textile industry.

In a letter addressed to the Chairman of PTC, Mr Fawad Anwar, the Council highlighted the severe financial strain faced by the textile sector; this sector contributes nearly 60% of Pakistan’s export earnings and employs over 15 million people. Despite the positive impact of structural reforms under the IMF program, their implementation has resulted in unsustainable financial challenges for the textile industry, requiring immediate policy recalibration.

Key Concerns Raised by PTC:

1. Crippling Energy Costs:

•Industrial electricity tariffs have reached 16-18 cents/kWh, nearly double the rates in Vietnam, Bangladesh, India, and China.

•Gas prices for captive power have surged above $13-14/MMBtu compared to $5-8/MMBtu in regional economies, with additional capacity charges and surcharges further inflating costs.

2. Mounting Financial Pressures:

•Working capital rates have jumped from 2% to approximately 14%.

•Recent IMF-driven tax policies, including minimum turnover and super taxes, have increased effective tax rates to over 50%, significantly impacting profitability in this low-margin, high-volume industry.

•Investment in industrial reinvestments, crucial for sector survival, has become nearly impossible due to soaring short-term interest rates.

3. Risk of Sector Flight:

•Citing global examples like Argentina (2001) and Greece (2010), PTC warned that stringent financial conditionalities could trigger deep recessions, social unrest, and permanent loss of industrial capacity.

•Rising costs have already led some Pakistani textile manufacturers to initiate operations outside the country, threatening Pakistan’s competitive advantage in textile manufacturing.

4. Worst-Case Consequences:

•PTC warned that the continued financial stress could result in the closure of textile mills, sparking mass unemployment, civil unrest, and long-term economic instability.

Recommendations for Sustainable Sector Stability:

PTC urged the government to adopt a balanced and calibrated approach that ensures economic stability without compromising the long-term viability of Pakistan’s key foreign exchange-generating industries. Key recommendations include:

•Balancing proposed reforms with global competitiveness considerations for export sectors.

•Gradually phasing out subsidies while enhancing public infrastructure for sustainable energy pricing.

•Reducing capacity charges by negotiating lower tariffs with power producers, especially for imported fuel-based plants.

•Revisiting levies on captive power and ensuring regionally competitive gas rates for industrial use.

•Implementing a more balanced taxation framework that ensures industry viability and retains critical foreign exchange inflows.

“We believe a calibrated policy approach can safeguard Pakistan’s textile sector from irreversible damage while aligning with the country’s macroeconomic goals,” stated Mr. Fawad Anwar, Chairman of the Pakistan Textile Council.

The Pakistan Textile Council remains committed to working collaboratively with the government to ensure sustainable growth for Pakistan’s textile industry, which is vital for the nation’s economic stability and long-term prosperity.