Saturday April 20, 2024

Crisis in textiles industry: Facts and fiction (1)

“There’s no sacred cow,” warns the government that is having serious bearings on the export. The government may not treat us as sacred cows, the textile exporters argue, but it must stop milking us without providing any fodders. Textile industry is the largest employer in private sector.All Pakistan Textile Mills

By Shafqat Mehmud
July 09, 2015
“There’s no sacred cow,” warns the government that is having serious bearings on the export. The government may not treat us as sacred cows, the textile exporters argue, but it must stop milking us without providing any fodders. Textile industry is the largest employer in private sector.
All Pakistan Textile Mills Association (APTMA) holds that such insensitive official approach may lay off thousands of the workforce employed in heavily labour intensive industry. In case such apathy continues to roast the goose, the time is not far away when most of the industries will go out of the business and thus rocking the boat of tens of thousand hapless employees. The contentions of the government and of the industry are poles apart.
Since it involve the fate of thousands of labourers and workers it will be important to (1) whether industry crisis call is propelled by facts or is meant to seek more concessions; (2) how industries in our regions are behaving; (3) what is efficiency level of industrial concerns; and (4) how the situation can be improved.
Textile industry is second largest employer after the government, according to the Economic Survey of Pakistan. Besides, this industry serves as natural barrier to stop mass scale migration to larger cities. The spinning industry which absorbs maximum workforce in textile sector is located in suburbs and remote areas. The industry imparts tertiary training and polishes the workers’ skills as technicians in the value added industry. Closure of the spinning sector, a leading manufacturer has warned, will render many people jobless who despite being unskilled get job at their doorsteps.
It will be pertinent to find out the real problem resulting in the crisis-like situation. Thirty percent production capacity of spinning mill is impaired, claims APTMA. The industry’s body corroborates its claims from the fact that against maximum exported quantity of 2,625 million square meter last year, the current export quantity has only been 1,880 million square meter causing a decline of export worth $3,225 million.
The reason for this colossal loss is the cost of yarn. It is 219 per unit in Pakistan as against 208 in India and this has resulted in importing 211,105 tons of yarn from India constituting 83percent of total import of yarn. Likewise, energy is available 24/7 to the manufacturers in India and China whereas industrial units in Pakistan experience power outages.
The industry tariff cost in terms of cent/KWH is 8.5 in China, 9 in India, whereas 14 in Pakistan. Consequently, the utilisation of installed capacity is around 90 percent in China and India and less than 70 percent in Pakistan. One of leading exporters has jokingly commented: “The government has rightly said there is no free lunch and has accordingly kept 70 percent gas supply suspended to the main bread-winner.” One of the central office holders of APTMA opined that the government is doing the loadshedding of “spinners.”
These gloomy facts kept the investment away from spinning and weaving industry. This is evident from the fact that there has been addition of one million spindles during the period 2008-13 as against more than 14 million in India and 35 million in China. There has been addition of only 131 shutter-less rooms in Pakistan as against 36,000 in India. One of the investors who went for expansion of his business regretted saying he didn’t see the psychiatrist before making investment as the units are lying idle for want of energy and for fear of taxman.
Answering about general perception that textile industry has been diverting loans received for textile expansion and now are facing bankruptcy, a CEO of a famous business house made it clear that such persons must be exposed along with the banks who sanctioned them loans. He hastened to add that efficient units should be allowed to survive. He did not agree with the government’s contention that textile industry instead of becoming self-efficient keeps on asking for one after another favour.
It is pertinent to note that there are different taxes which amount to 5 percent of sale. Such a heavy taxation hardly makes any sense when the maximum profile available globally is less than 3 percent of the turn over. This has affected the export of cotton yarn, which has decreased by more than 20 percent as compared to last year. The government always claims of encouraging the export-oriented industry but they are not translated into actions. “Government encourages but only on papers,” said an industry leader.
Faisalabad Chamber wondered that the government outlay for textile policy was Rs6 billion but has not issued any notification to legally implement and spend it. The exporters say they are not scared of competing with India but Pakistani officials are keeping textile policy sealed in red-tapes. His contention was found correct as India provided Rs26 billion for the years 2012-17. That resulted in surge in export by 76 percent and added 16 million direct jobs. When questioned as to why Pakistan textile is not adding new jobs, one of the leading manufacturers counter questioned, “Is my own job secure?” The questions need objectives analysis whether the manufacturer’s own job and of tens of thousands working in textile is under serious threat or not. (to be continued)
Author is former senior official of FBR
Twitter: @Chafqat