“We are putting off Friday strike,’’ Chairman of the All Pakistan Textile Mills Association (APTMA) Mr Iqbal Ibrahim informed Dawn on Thursday evening on telephone after he emerged from the meeting with federal commerce and textile minister Chowdhry Ahmad Mukhtar, Finance Minister Naveed Qamar and State Finance Minister Ms Hina Rabbani Khar. An APTMA press release said on Friday that the strike call was being deferred conditionally.
“The ministers gave us a positive indication of reviewing the 68 per cent increase in gas price for captive power plants,’’ the APTMA chief said. Textile leaders in Karachi were confident that gas price increase for captive power plants would now be 31-37 per cent lower than proposed initially.
As for other issues like the cash subsidy on textile export, moratorium for textile mills on bank loans, the extension of long-term credit at discount rates for export-oriented units to open- ended textile units, Iqbal Ibrahim said the ministers have given an assurance for a “sympathetic consideration’’ and a decision may be announced on July 15 at the meeting of the Economic Coordination Committee of the Cabinet to be chaired by the prime minister.
While APTMA seems to have placated by the government on gas price issue for captive power plants, a very large chunk of textile industry remains agitated on the issue of 31 per cent rise in gas prices for general industrial consumption.
“APTMA represents the big business and it settles its issues with government on its terms after compromising on fundamentals of the industry at large’’ Adil Mahmood, a leader of Lahore based All Pakistan Textile Association (APTA), a breakaway group of APTMA said.
The Textile Association of Pakistan, another splinter group based in Karachi issued a statement on Thursday to declare that 31 per cent increase in gas price is adversely affecting those segments of textile industry in which gas is used as a vital input. A TAP spokesman identified dyeing, processing and printing of woven knitwears towels etc are value added sectors where gas is a key input and an abnormal rise in gas prices would impair the industry.
The association urged the government to realise that there are two slabs of tariff on gas for textiles. One is for energy for which the prices have been raised by 68 per cent on pretext of bringing power generation cost at par with that of Wapda.
“There is no uniform power tariff by Wapda’’, an official in APTMA office in Lahore said. Power tariff for industry is set by power distribution companies. The lowest rate at Rs4.25 per unit for industry is set by Lahore Electric Supply Company (LESCO) as transmission and pilferage related losses are said to be the lowest. Power tariff is the highest in Peshawar where transmission and pilferage losses are the highest.
The cost of captive power plants in textile mills varies from unit to unit and from area to area. But the average power generation cost of a captive power plant is roughly Rs3.50 a unit. It would go up to more than Rs6 a unit if gas prices are pushed by 68 per cent. At 31 per cent increase in gas prices, the average power generation cost would be Rs5 a unit. The Wapda and KESC are also set to increase power tariff in near future and industry analysts believe that there would not be much difference in Wapda /KESC power tariff and that of captive power plant in a textile mill.
But the real crunch for textile business is coming from 31 per cent increase in gas price for the industry.
“Instead of increasing 31 per cent price on gas, the government can generate resources by making some adjustments within overall tariff structure of the two gas distribution companies-Sui Southern and Sui Northern-and also by taking some hard decisions’’, a former Chairman of SITE Association who is closely engaged in resolution of current textile industry crisis, said.
“There are 47 gas wells in the country’’ he informed and said the comparison of well head cost of each of these gas wells shows a wide disparity. For example, for Sui gas, the oldest source, the well head cost is at least Rs134 per MMCF. But for Kandanawari, the well head cost is Rs829.79 per MMCF. “These disparities in well head cost need to be reviewed and rationalised’’ he suggests. He is convinced that it will generate good amount of resources.
His second proposal is that 45 per cent of gas business is under control of two government concerns-the OGDCL and PPL. These two companies can cut down on their gas prices to sell them at lower price to gas distribution companies.
“At present the gas is being sold at around Rs18 MMCF to distribution companies’’ he disclosed. This can be brought down to Rs14-16 MMCF to provide some relief to the industry when it is most hard pressed.
“The two gas distribution companies — Sui Southern and Sui Northern — are government-owned and get an assured return of 17 per cent and 17.5 per cent on their fixed asset value.
“Why can’t these companies be asked to take 14 per cent annual return for next two to three years till the industrial activities are revived’’ he said. Lastly, the government should abolish excise on gas (which gives a return of over Rs5 billion) and a substantial cut in gas development surcharge.
“Our prime objective these days is to protect jobs in the industry, keep our presence in international export market and earn foreign exchange to finance our imports and improve our terms of international trade”, he argued.
The Economic Coordination Committee of Cabinet (ECC) is meeting on Tuesday to decide on gas tariff and also on cash subsidy on textile export. While the big business in textile wants export performance based on export volume be treated as criterion for giving cash subsidy, a large number of textile exporters have expressed their strong resentment.
“There are hardly 10 textile exporters who net in annually $100 million but about 12,000 medium and small exporters work day and night to earn more than $10 billion in a year’’, a garment exporter said. A general impression is that by accepting proposed mechanism for giving cash subsidy, the government will ignore small business.
Exporters complain that successive governments have depended a lot on a few big textile business houses and have not bothered much about the industry in general. Representatives of the same big business houses have been taken in the advisory councils and in advisory committees for inter- ministerial meetings.
All eyes are now on the scheduled ECC meeting to be chaired by the Prime Minister on Tuesday and textile industry leaders will decide their future course on Wednesday.