KARACHI: Textile exports declined more than 16 percent in March 2015. Pakistan Yarn Merchants Association (PYMA) has demanded immediate measures to boost exports. According to the details, exports of cotton decreased by 29.36 percent in value terms and 12.99 percent in quantity. While, the cotton cloth exports also declined by 14.45 percent in value and 37.57 percent in quantity, exports of bed wear dropped by 16.94 percent in value and 15.15 percent in quantity, towels exports went down by 19.03 percent in value and 23.51 percent in quantity, exports of garments slid by 5.20 percent in value and 12.57 percent in quantity.
The only item showed increase was knitwear sector with 28.53 percent increase but 7.41 percent decline in value. In spite of that European Union had granted GSP concession to Pakistani textiles under which Pakistan could export its textile products duty free to EU markets. Pakistan’s exports to the European Union (EU) have increased 29pc during January to September 2014, after receiving the Generalized Scheme of Preferences (GSP) Plus from the EU. But the real potential of the facility could not be materialized due to a severe energy crisis since April 2014. There was surge in exports to the EU during the first three months followed by a constant decline. Pakistani exporters could not avail this opportunity to benefit from this concession because of several problems such as electricity and gas shortages that reduced the productivity of units.
The units were unable to meet the demands of foreign buyers. The Association said that the distribution companies coupe this short fall through appropriate planning by taking stock of actual demand area wise, industry wise and market wise. On the other hand, All Pakistan Textile Mills Association (Aptma) has appreciated the government decision of imposing regulatory duty (RD) of 10 percent on yarn and fabric as wise and justified decision. This decision would save the textile industry of Pakistan where 40 percent capacity of spinning, weaving and processing mills had been closed down. This can be proved by the financial results for the first quarter of 2015-16 of textile companies in spinning; weaving and composite units that had shown around Rs40 million loss on an average. About 27 basic textile mills losses compelled them to close their units.
Earlier Aptma demanded imposition of 15pc regulatory duty on the import of subsidized fine count cotton yarn, particularly from India. The Indian textile industry manufacturers get a subsidy of Rs26.72 per kg in the form of lower interest rate, value added tax benefit, duty exemption on electricity bills, reduced transportation cost of cotton and yarn and power cost besides central subsidies. The total value comes to around Rs120 million per annum for a mill of 25,000 spindles. The annual import of fine count cotton yarn from India reached 30,000 ton in 2014 against 6,500 ton in 2012. Import data of the first six months of the current FY indicated that 3,000 ton per month is coming into Pakistan from India. Of which about 90pc of imports come from India, which is extending due to rebate to its manufacturers.
India is capturing Pakistani domestic market by dumping fine count cotton yarn. Pakistan’s 30 mills have a production capacity of 6,000 ton per month while India is dumping subsidized 3,000 ton on an average. The energy crisis resulted an increase in the cost of textile industry that made far more expensive at around 16 cents/ kilowatt per hour (kWh) compared to the textile industry in the region, which costs at 7 to 9 cents/kWh. The basic textile exports of yarn and fabric have already slumped 11pc and 36pc respectively, since April, due to the two former reasons. Aptma warned the government that textile exports might reduce to $2 billion, if the sector is not given the promised supply of energy especially in Punjab. Moreover, a huge amount in sales tax refunds is outstanding for about one and a half years, which has caused severe liquidity problem for textile industries. It was hoped that the government would also give them level playing field by withdrawing Gas Infrastructure Development Cess (GIDC) and power surcharge.
Historically, the textile industry of Pakistan started its journey since 1957 & organized it independently. About 100pc of the country’s textile exports and more than 50pc of the clothing exports sent by the members mills of Aptma. The textile industry is the backbone of the economy. It contributes 8.5pc to GDP and employs over 40pc of the manufacturing sector workforce. Besides, the spinning industry being the sole consumer of cotton worth $5 billion, sustains the largest cash crop of Pakistan. World Trade Agreement of Pakistan has been integrated with global trade that operates on the principle of free and open international trade. This is also applied on Pakistani textiles and clothing sectors that was integrated into the upcoming $800 billion international textiles and clothing trade. The international textiles and clothing market is intensely competitive and operates on very low margins. Any sector has to be competitive enough to survive in the quota free world of international trade. With the requirements of the WTO regime and to be able to compete therein, the spinning industry made $3.5 billion investments since the quota regime of ATC was the free market mechanism away with in favors of open and free international trade.
The spinning industry operates in a free competitive environment especially with regards to the use and availability of raw materials. It procures 11.5 million bales domestically and 3 million bales from the international market on international terms. International procurement became necessary due to insufficient cotton crop since the last ten years. It is therefore perfectly legitimate for it to market and sell its products in the international market on the same principles. The free market regime enabled a significant resource transfer to the farm sector on account of cotton sale proceeds at international prices. As a result an additional Rs200 billion has been transferred to the agricultural sector. Textile exports have also increased in proportion and likely to maintain the momentum by increasing up to $4 billion this year.