The second week of December 2013 brought a good news for Pakistan and its textile industry in the form of Generalised Scheme of Preferences (GSP) Plus status awarded to it by the European Union (EU). Under this status, Pakistan secured the long-awaited duty-free access to the European markets.

The country’s industry leaders expected the annual textile exports to reach the target of $16 billion in the year 2013-2014, up from the figure of $13 billion recorded in the year 2012-2013. Most of this increased business was expected to come from the European markets. The target of 23 per cent increase in exports did look ambitious at that time but the industry players believed it was very much achievable.

However, the figures gathered at the end of the fiscal year 2013-2014 (June 30) show that the overall textile exports have grown by a meager 5.3 per cent and reached around $13.74 billion as compared to the preceding year’s figure of $13 billion. Though there is an increase in exports, it cannot be termed an achievement keeping in view the potential which could not be availed.

The textile industry players believe the less-than-desired growth in exports is due to the dismal security situation in the country, the persistent energy crisis, abrupt appreciation of rupee against dollar and other similar reasons.

As if all this was not enough, the recent political turmoil in the country and the ensuing uncertainty have added insult to injury, says All Pakistan Textile Mills Association (APTMA) Punjab Chairman SM Tanveer. He stresses the textile industry cannot sustain any kind of uncertainty for long as it is overly exposed to the international market and is overwhelmingly dependent on exports.

An example of how the recent political crisis has hurt the interest of the local exporters and importers, including those dealing in textiles, is shared by Agha Iftikhar, President Customs Clearing Agents’ Association, Lahore. He tells TNS that the government machinery confiscated many containers destined for Karachi seaport without realising that they have to reach there for onward shipment to global destinations. These containers were used to block roads to stop followers of two political parties from reaching different locations.

He goes on to say there were many containers carrying yarn, grey cloth and other textile products which could not reach Karachi seaport in time. The connecting vessels had to leave the port without carrying these containers as shipping lines have to follow their schedules strictly.

This scenario, Agha says, has put exporters in an extremely difficult situation. Either they will negotiate with the international buyers and buy more time for delivery of goods or they will send the merchandise by air if it has to be urgently used there in a manufacturing process. The huge costs incurred on air freight will have to be borne by the exporters who will try to retain their international buyers at any cost, he adds.

The additional rent of these containers, demurrages and fines for holding them for longer times will be in addition to this cost. However, he says, the biggest loss can be the loss of international buyers’ interest in Pakistani textile products if such situations keep on arising.

Anis-ul-Haq, Secretary, APTMA Punjab, also has a narrative to share. He says it is a miracle that the textile industry of the country has survived and is still competitive in the global market despite all odds turned against it. Apart from the perennial problems such as energy shortage, he says, the additional burden the industry had to bear over the last one year brought it to the brink.

For example, he says the interest rate is still 14 per cent -- the highest in the region -- which should ideally have come down to facilitate the industry. Besides, he laments that in just one year the cost of gas has increased by 43 per cent, from Rs 510/mmbtu to Rs 730/mmbtu, electricity by 67 per cent, from Rs 9 per unit to around Rs 15 per unit, minimum wages by 50 per cent, from Rs 8,000 to Rs 12,000, diesel by 21 per cent, from Rs 95 per liter to Rs 115 per liter and inflation by 16 per cent, from 7.9 per cent to 9.2 per cent. If this trend continues and input costs rise every year, Pakistani products will become uncompetitive in the global market, he adds.

On the energy crisis, Anis says the textile industry gets gas for 8 hours a day and electricity for the rest of the day. If the time spent on switching from one source of energy to the other is deducted, one finds the industry gets energy for around 20 hours a day. The cost of one unit produced from gas is Rs 6.75 as compared to Rs 14.81 charged by WAPDA. If the average cost of consuming units from both these source is calculated it comes to Rs 12.31 per unit in Punjab.

In Sindh, he says, the textile units get gas supply for 24 hours a day which brings their electricity unit cost to Rs 6.75. This, he says, causes immense disparity between the energy costs borne by units in Sindh and Punjab where 70 per cent of the textile industry is located. The Punjab textile industry, he says, bears an additional cost of Rs 102 billion a year as compared to the Sindh industry in order to keep its wheel running.

He calls for doing away with this disparity and urges the government to ensure 250 million cubic feet gas per day to Punjab-based textile mills instead of the 100 million cubic feet gas it is currently getting. This will help Punjab textile industry runs 24 hours a day on low-cost electricity produced through gas. This way around 1,000 megawatts electricity, which these mills are getting from the national grid, will also be spared and made available to the domestic consumers.

Gohar Ejaz, former chairman APTMA, believes the chronic structural issues keep the textile industry from growing at the pace at which it can grow. For example, he says if regular energy supply is ensured at affordable rates, the industry can convert the raw textile products into value-added goods and earn additional $10 billion.

In the existing conditions, the manufacturers find it safe to sell raw textile products in the local and global markets at nominal profits to get their investments back. They do not fetch high unit price which they could have by selling value-added and finished products, he adds. "The textile exports figure could have been much higher if value-added textile products had been exported in larger quantities."

Though the existing conditions have disturbed the manufacturers, the textile industry players are mostly concerned about the energy shortage they face and the rate of electricity they have to pay. Even the news about the government launching coal power projects does not provide solace to them.

As Anis puts it, the textile industry will have to give explanations to the international community which is too wary of the fuels which are not environment-friendly. The international importers have already started questions about the footprint the envisaged coal plants will leave. "Being primarily an export-oriented industry we are exposed to the international pressures and have to be compliant with international obligations as well."

No doubt the situation facing the textile industry, most of which is concentrated in Punjab, is quite complex. Its concerns may be genuine, but these will have to be discussed in the light of decisions taken by the past government. Other provinces who have won preferential right over their natural resources will not be willing to part with this privilege -- making things tougher and tougher for Punjab. So the Punjab’s textile industry calls for a multi-lateral dialogue on the issue which culminates into a win-win situation for the industry in all the provinces.

But for that to happen, the industry players will have to wait and pray for an end to the political crisis which is consuming all the time and energy of the state functionaries who matter.