New textile policy seeks to boost exports
ISLAMABAD: While doing away from the existing mechanism for the provision of gas and electricity at subsidized fixed rates, the government has approved a new Textile Policy, envisaging to double its exports target up to $42 billion over the next three years.
This was announced by the Adviser to PM on Commerce Abdul Razak Dawood while unveiling Textile Policy for 2002-23 to 2024-25 here at PID Center along with Additional Secretary Ministry of Commerce Ahmed Mujtaba Memon on Wednesday.
The government is eyeing to fetch textile exports of $21 billion during the current fiscal year 2021-22 against $15 billion materialized in the last financial year. Under the newly placed mechanism to link provisions of energy supplies for textile exports with international competitive prices, the government has extended guarantees for continuous provisions of gas and electricity at “internationally and regionally competitive prices” from the next budget 2022-23 instead of supplying at existing fixed rates.
It clearly indicates that the prices of gas and electricity for the textile sector may be revised upward from the next fiscal year 2022-23 starting from July 1, 2022. Now the rates of gas and electricity will be fixed on an annualized basis to align them with competitive international prices on the occasion of every budget announcement.
Thus, the government has done away from the existing mechanism whereby the government is providing electricity at 6.5 cents per unit and gas at $6.5/mmbtu for the textile sector. The government had jacked up prices of electricity up to 9 cents for captive power plants recently. Interestingly, the incumbent PTI-led regime’s tenure will end next year in 2023 but the cabinet approved the textile policy for three years beyond its term and it is unknown whether the coming government into power will stick to this approved policy or not.
Prime Minister’s Advisor on Commerce Abdul Razak Dawood said that the Textile Policy approved by the cabinet envisaged three years target as textile exports will be jacked up to $27 billion in the fiscal year 2022-23, $34 billion in 2023-24, and $42 billion in the fiscal year 2024-25. The government has fixed textile exports target of $21 billion during the current fiscal year. He said that initially the first draft of Textile Policy had asked for fixed prices of electricity and gas provisions for textile exports but later on it was envisaged that the textile sector would be provided competitive prices to bring them at par with international and regional competitors keeping in view the rising energy prices in the international market.
“On eve of every budget, the government will announce subsidy for providing gas and electricity to textile sector keeping in view prevailing international prices at that point of time,” Advisor to PM on Commerce Abdul Razak Dawood said. It is relevant to mention here that RLNG prices had gone up from $4 per MMBTU to $36 while the prices of POL products went up from $75 to $96 per barrel in the international market. The electricity tariff is fixed at 6.5 cents and for captive power plants for over 9 cents fixed for the current fiscal year and now the subsidy amount will be allocated on the occasion of every budget.
Dawood said it was a challenge for Pakistan’s economic managers to achieve sustainable growth as the need arose to reverse the accelerated pace after emerging challenges on the economic front. He said that Pakistan would have to diversify on account of products as well if Islamabad wanted to achieve exports of $100 to $200 billion over the next 10 years period. The share of textile exports in the world stood at $1 trillion while the share of IT exports was hovering around $5 trillion so the real potential for Pakistan was lying in IT, pharmaceutical, and other products. He said that Pakistan’s share in the world’s textile exports stood at 1.8 per cent and there was a dire need to bring geographical diversification as the country 75pc exports are targeted for 10 countries only. “Without diversification, Pakistan cannot achieve a leap forward on exports” he added.
The minister said there has been an increase in the value and quantity of exports and their earnings. With every one Pound worth of raw material, he said, Pakistan previously used to fetch $2 over textile exports, which has now increased to $8.
He said that the new Textile Policy made a commitment for the provision of gas and electricity at competitive international prices, a continuation of tariff rationalization and sticking to the policy of Duty Drawback on Local Taxes and Levies. Answering a query regarding abandoning of Export Refinance Scheme under the newly enacted SBP Amendment Act, Additional Secretary Ministry of Commerce said that the government would place a new mechanism for the provision of long term financing for incentivizing exports. The Advisor on Commerce did not reply when asked about the exact cost of subsidy for providing cheap gas, electricity to the textile sector during the last three years period.
