Pakistan’s textile industry, a crucial export sector, is currently grappling with high energy costs and a weakening currency, affecting its competitiveness in the global market and making it difficult to maintain its standing against international rivals.
The international price hike in liquefied natural gas (LNG) has led the caretaker government to increase the natural gas tariff by over 60% since August 2022. The recent rise in November 2023 has escalated the gas tariff significantly for textile units in both Punjab and Sindh provinces.
The Oil and Gas Regulatory Authority (Ogra) has linked gas tariffs to the delivered ex-ship (DES) price of LNG, suggesting further increases in the future.
The rising gas tariff is not only making the textile industry less competitive internationally. Still, it also creates a dilemma as the cost of captive power generation surpasses grid-power rates. Analysts note that most of the generation cost with such high gas tariffs has exceeded viable levels, making it difficult for textile mills to operate efficiently.
Government Measures and Regional Comparisons
Despite the government’s efforts to subsidize RLNG for the textile industry, the rate remains higher than the regional average in countries like India, Bangladesh, and Vietnam. This disparity has further reduced the competitiveness of Pakistan’s textile exports. The textile industry faces additional hurdles with frequent interruptions in electricity and gas supplies, which disrupt production processes and efficiency.
The high energy costs have led to the closure of many textile mills, with APTMA reporting over 1,500 units shutting down due to increased power and gas tariffs. The industry’s reliance on natural gas as a primary energy source and the high regional competition pose significant challenges. Addressing these issues is critical for the survival and growth of Pakistan’s textile industry in the competitive global market.
