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January 24, 2021

Despite go-ahead by PM twice: Textile Policy 2020-25 in the doldrums

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January 24, 2021

ISLAMABAD: Even after go-ahead given by Prime Minister Imran Khan twice, the approval of Textile Policy 2020-25 is still in the doldrums as many important economic ministers, Special Assistants to PM (SAPMs) are showing defiance by opposing the policy tooth and nail, top official sources privy to the development told The News.

“The Commerce Ministry included the Textile Policy in the agenda of ECC many times, but some ECC members are not ready to accord approval to the Textile Policy which ensures electricity tariff at 7.5 cents per unit for five years and RLNG supply at $6.5 per MMBTU. The same members played an important role in the Cabinet Committee on Energy (CCOE) for making the decision to stop the gas supply to captive power plants (CPP) meant for export industry from March 1, 2021.”

This means from March 1, 2021, no local and imported gas will be available for the export sector and electricity rate of 7.5 cents mentioned in the textile policy 2020-25 that also had got a nod from the prime minister is now being denied. “Now the export sector will have to depend only on the unpredictable electricity from the national grid at 9 cents per unit from March 1 onwards.”

According to the official sources, Adviser to Prime Minister on Commerce and Investment Abdul Razak Dawood is reported to have been ditched by some economic ministers in various ECC meetings. They pleaded that the export sector has already been heavily incentivized and under the incentives, the export industry is being provided electricity from the national grid at 9 cents per unit.

Irritated by severe opposition, the sources said that Razak Dawood has decided to apprise the prime minister that he is facing much opposition on the textile policy and he is not taking it to the ECC until the PM chairs a meeting on the issue.

Dawood’s contention, the sources said, is that the export industry will lose its market if it is kept deprived from the regional rate of electricity and gas, being provided to the industrial sectors in India, Bangladesh and Vietnam. The recent surge in the country's exports will die down if textile policy is not approved.

“Dawood seemed worried saying that the process of industrialization that has just picked up in the country will die down. And if it happens, it will be a great tragedy,” the sources said while quoting the adviser on commerce as saying.

“The demand of 7.5 cents per unit electricity tariff mentioned in the proposed Textile Policy 2020-25 is not acceptable to some ministers. One important minister is also reported to have gone up to the limit, saying that businessmen are enjoying luxurious life in vast villas. This shows the minister’s special kind of hatred towards the business community.”

Shahid Sattar, Executive Director of All Pakistan Mills Association (APTMA), when contacted, lambasted the government for stopping the gas supply to the export sector from March 1, 2021 arguing that the move of the energy ministry would prove detrimental to the industrial activities that have just picked up momentum while the moratorium on RLNG and local gas supply to captive power plants will cause 50 percent increase in production cost owing to which the export products in international market would no more be competitive. This will result in decline in exports of the country.

Sattar said that export industry is in the process of expansion and the country is now on way to industrialization, which was in the mode of de-industrialization some two and a half years back and more importantly the industry has now started importing power plants having high efficiency, but unfortunately the government is going to place the ban on gas to captive power plants.

He also argued that captive power plants are indispensable for the export industry as the electricity generated from CPPs does not fluctuate, which is imperative for the delicate textile machines. He, however, said that the electricity that comes from the national grid is not of the quality that the textile industry needs, arguing that the national grid electricity has too many fluctuations, which is why the production suffers a lot. He also referred to NEPRA reports which also say that one fluctuation causes 4-5 hours closure in production of textile products.

He further argued saying that given the past performance of the power sector and the frequent breakdowns and variations, the industry does not have faith that the power sector will be able to deliver on a sustained stable and competitive basis.

Sattar explained that the latest machinery being used in the industry is equipped with electronics (electronic cards/chips), which are highly sensitive to electricity fluctuations. The cards or chips installed in the machinery burn out or trip if there are variations in frequency/voltage/supply of electricity, halting the entire production line. The industry experience of utilizing grid electricity hasn’t been productive so far.

Apart from production losses, the capacity and performance of installed machinery is also compromised, he said adding to further maintenance and repair costs. Losses in production and investments apart from production losses will compromise industry’s and eventually Pakistan’s credibility in performing orders; there will be adverse consequences from reduced exports, unemployment and loss on already-made investments. The negative impact of moratorium on supply of gas will be far greater than making 150 MMCFD natural gas available for utilization to the power sector.

Sattar also said that a very significant number of mills have recently invested millions of rupees in new gas/RLNG generation equipment based on meeting efficiency criteria as espoused by the government. The abrupt and ill-conceived change in policy will bankrupt these companies

“Mills have started receiving calls from banks to verify how they will fulfill the orders based on gas/RLNG supply and pay back of refinance facilities is being demanded,” he said.