LAHORE: The downslide in textile sector witnessed in 2015 was largely arrested in 2016 with yarn and fabric being the only sub-sectors where decline still continues. Indecisiveness of the government on proposed textile package created uncertainty impeding investment plans.
According to the data compiled from government statistics, the textile exports of six major items declined by $363 million to $9.888 billion in Jan-Nov 2016, compared to $10.251 billion in the same period of 2015.
During the same period, cotton yarn exports decreased $228 million and cotton fabric by $155 million. Cumulative decline in exports of these two items amounts to $383 million that is $20 million higher than the total decline in textile exports. This in other words means that the exports in value-added sectors increased, though only nominally.
In the first 11 months of 2015, cotton yarn export was $1.431 million that declined to $1.103 million during the corresponding period of 2016. Cotton fabric exports were down from $2.126 billion to $1.971 billion in 2016.
Knitwear exports during Jan-Nov 2015 were $2.187 decreasing nominally to $2.186 in calendar year 2016. Bed wear exports however increased from $1.858 billion to $1.890 in 2016, towels exports declined from $694.7 million in 2015 to $691.5 million in 2016. The exports of readymade garments increased from $1.955 billion in 2015 to $2.047 billion in 2016.
Pakistani Prime Minister had assured the textile sector of incentives in September 2015, but nothing was done for over a year. He again promised the textile sector in October 2016 that the textile package would be announced soon. No notification has been released in this regard.
This has created uncertainty among textile exporters, who cannot quote their best prices. They would miss a big opportunity at the largest global fair on home textiles which is to be held in Frankfurt in the second week of January.
Textile sector, like the preceding five years, did not invest in balancing and modernisation in 2016 that further deteriorated its spinning and weaving machines. The eroding competitiveness of the sector was not only because of high cost of doing business in Pakistan but also due to 10 years old machinery.
The older machines consume 40 percent more power than the latest basic textile machines. New machines produce more with only 33 percent of the workforce needed in older machines.
The cost of energy came substantially down in 2016. The textile industry in Punjab was completely dependent on state supplied 18 hours per day of uncertain power and average six hours natural gas supply during summer in 2015.
During acute power shortages, most of the millers had to run their diesel generators that produced costly power. In 2016 they were assured 24/7 electricity at an average of Rs12 per unit and 24/7 RLNG for their generators that produced electricity at an average of Rs10 per unit.
That was a vast improvement, but the dilemma for 70 percent of the industry based in Punjab is that the energy cost in other provinces is substantially lower. They produce electricity from natural gas that is 35 percent cheaper than RLNG.
Another drawback faced by the textile sector in 2016 was sharp rise in textile imports. Textile imports have crossed $3 billion. The imports include raw cotton that is usual except for the fact that this year the imports were higher due to low cotton output in Pakistan. Indian yarn has also made substantial inroads in the country. Even the readymade garments importshave increased – all at the expense of the domestic textile sector.
It was the worst year for cotton crop in the last 25 years, as the country harvested less than 10 million bales. The industry coped with the shortage by importing bales which were available globally at low cost. Bureaucratic hurdles impeded cotton imports from neighboring India.
The regulations that were invoked after tensions with India increased hurt our domestic industry, but were a blessing for Indian millers as the glut brought down cotton price in India.
Going forward, the basic textile industry has realised that its survival lies not only in technology upgrade but also in value-addition so they consume yarn and fabric in their own concern. Though the larger textile houses are on target in this regard, the comparatively small units are rich in ideas but short on resources.