KARACHI: Industrial bodies are up in arms over the government’s recent decision to increase gas tariffs, warning that this move could lead to the shutdown of numerous industrial units, a rise in unemployment, and a halt in exports unless the decision is reversed.

In a concerted appeal, they have called on the government to retract the tariff increase for the sake of the national economy and to prevent the industrial sector from collapsing.

Asif Inam, chairman of the All Pakistan Textile Mills Association (Aptma), expressed serious concerns over the government’s resolution to raise the captive gas price to Rs2,750 per million British thermal units (mmBtu), alongside supplying the industry with a blend of 35 per cent domestic gas and 65pc RLNG, taking the price of captive power generation well above regionally competitive levels.

He said that the international competitiveness of Pakistan’s textiles and apparel exports was being continuously eroded by ever-increasing energy prices, which he said were over twice those in competing regional economies.

Stresses local businesses rapidly losing market share to regional peers due to high cost of production

Production at these rates was not financially feasible and the local industry was rapidly losing market share to countries like Bangladesh, India and Vietnam, which had significantly lower energy tariffs, Mr Inam said.

The government, he said, wanted to shut down the captive generation by making it unaffordable. With grid electricity prices at over 16.7 US cents per kilowatt-hour (kWh), there was no financially viable source of energy for the industry to continue manufacturing with, he feared.

While the intent to streamline gas consumption was understandable, the transition must not jeopardise the textile and apparel industry’s viability, he said. For the industry to remain competitive, provide employment and earn foreign exchange, energy prices must align with regional benchmarks, he added.

‘Running industry no longer profitable’

Muhammad Kamran Arbi, president of the SITE Association of Industry (SAI), said the business community was given the assurance of 9 cents per kWh electricity tariff by the caretaker government, bringing a sigh of relief and hope for the business community that the new tariff would help reduce production costs. However, contrary to that assurance, petroleum, electricity and gas tariffs were being increased constantly by the caretakers, he regretted.

He said the national economy was passing through a severe crisis, and running an industry was no longer a profitable business. He questioned the caretaker prime minister as to how the economy of the country could be stabilised and strengthened in the absence of industrial and business activities.

“Unfortunately, the caretaker government has taken no step to provide a competitive environment to industries, lower the cost of production and reignite the engine of the national economy, which has left the industrial community in despair,” Mr Arbi said.

The prices of utilities should be fixed after thorough consultation with stakeholders, justifiable as well as regionally competitive so that industrial activities continue without hurdles, which would ultimately have a positive impact on the national economy and exports, he said.

Johar Qandhari, president of the Korangi Association of Trade and Industry (KATI), said gas price hikes posed a severe threat to the industrial sector, potentially leading to increased unemployment, which would make industries less competitive compared to their counterparts in neighbouring countries.

Highlighting the industry’s prior demand for a reduction in gas prices from Rs2,100 per mmBtu to Rs1,800, he said the recent government decision to raise prices to over Rs2,700 per mmBtu intensified the challenges faced by the industrial sector.

Urging the government to immediately fix gas prices at Rs1,800 per mmBtu for industries, Mr Qandhari emphasised the need for the government to explore and provide affordable energy alternatives for the industry to ensure the competitiveness of Pakistani products in the global market.

Published in Dawn, February 18th, 2024