APTMA Southern Zone Strongly Rejects Increase in Gas Tariff

All Pakistan Textile Mills Association, Southern Zone has strongly rejected increase of 223 in gas tariff in last one year and termed it as detrimental for the export oriented textile industry of Pakistan.

The observation was made in the Extra Ordinary General Body Meeting of All Pakistan Textile Mills Association of Southern Zone held today i.e. Thursday, 7th March 2024 which was attended by a large number of members of the zone including Central Chairman APTMA. The meeting observed that the recent increase in gas tariff has proven to be disastrous for the export oriented textile industry which has the largest share of 60 percent in total exports of the country.

It was also observed by the meeting that due to increase of 223 percent in gas tariff, the export oriented textile industry is becoming uncompetitive in the international market and is compelled to shut down due to the unbearable and unsustainable financial losses emanating from unprecedented cost of doing business; primarily due to highest ever interest rate of 22 percent and an astronomical increase in energy prices – which has made Pakistani exporters uncompetitive in the export markets by a large margin. He said that gas tariff was Rs. 852/MMBTU till 31st December 2022 and was raised to Rs. 1100/MMBTU from 1st January 2023 then to Rs. 2400/MMBTU in November 2023 and now raised to Rs. 2750/- MMBTU from 1st February 2024, thus overall increase of Rs. 1892/MMBTU or 223 percent during a year.

The meeting also observed that the electricity supplying companies in Sindh and Balochistan like KElectric and HESCO do not have the capacity and capability to provide required load of uninterrupted electricity to the industry, therefore industries of the two provinces are compelled to use their gas based power plants for generation of electricity to operate their mills without any interruption. Presently the government is trying to encourage the use of grid electricity instead of electricity produced by gas based power generation, without realizing that this policy is not implementable in Sindh and Balochistan due to poor capacity and supply of grid electricity. This policy instead of resulting in increase of grid electricity consumption is going to result only in closure of mills.

Mr. Zahid Mazhar said that due to 223 percent increase in gas tariff in one year, there is a capacity closure of 30 percent firms in the textiles and apparel sector and rest are at high risk of total closure over the coming weeks due to becoming uncompetitive in the international market as compared to the regional competitors like India, Bangladesh and Vietnam. The export capacity of $600 million/month of textile industry of the country remains unutilized, mainly due to the high energy cost as we cannot export inflation, he added.

Mr. Zahid Mazhar further said that the export oriented textile industry is dying fast and Pakistan is losing market share in the global marketplace due to the alarming rise in Energy Tariff. The industry is being provided grid electricity at Rs.52/kWh i.e. 18 cents/kWh, which is more than double of what the competing countries are charging from their industry. In addition the gas/RLNG rates for the textile sector are much higher i.e. over $12/MMBTU as compared to the regional competing countries like India at $6.5/MMBTU, Bangladesh at $7.5/MMBTU, and Vietnam at $9.80/MMBTU.

He said that the overall hike in gas tariff is 263.85 percent as the industries of Sindh and Balochistan are forced to take RLNG instead of indigenous gas at the ratio of 40 percent of RLNG due to which the cost of gas has risen from Rs. 852 per MMBTU till 31st December 2022 to Rs. 3100 per MMBTU resultantly the cost of production has also increased tremendously which is beyond the limit of absorption by the industries of two provinces.

He pointed out that the Supreme Court of Pakistan has declared that gas based power plants of the industries producing energy for consumption of their own mills as industry instead of Captive but the government is creating discrimination and not treating them as industry and their gas tariff is fixed at Rs. 600/MMBTU or 27.91 percent higher than that of industry. In addition there is a discrimination in blended gas ratio i.e. 80:20 for general industry whereas for captive power plants the blended gas ratio is 60:40.

Mr. Zahid Mazhar further said that the industries of Sindh and Balochistan are asked to take RLNG instead of indigenous gas to run their mills even though the two provinces are producing about 85 percent of the natural gas produced in the country which is against the spirit of the Article 158 of the Constitution of Pakistan according to which “the Province in which a well-head of natural gas is situated shall have precedence over other parts of Pakistan in meeting the requirements from the well-head”.

APTMA demanded the federal government to reverse its decision of astronomical increase in gas tariff to make textile exports competitive in the international market which is being continuously eroded by surge in energy prices during last one year. The meeting further demanded that the industry and their power generation be declared first priority in supply of gas if the government is interested to achieve its target of earning foreign exchange of 50 Billion Dollars through exports which is the need of the hour.

He requested the SIFC and the newly elected government to take notice of the above issues and review the policy regarding gas and electricity.