Ending RCET will be ‘disastrous’ for economy, say textile exporters

KARACHI: Textile makers-cum-exporters on Wednesday warned the federal coalition government of a ‘disastrous’ impact on the five exports-oriented sectors if it ended the regionally competitive energy tariff (RCET) facility, saying that the economic turmoil will further worsen with any imprudent decision.

The exporters perceive the present government’s expected move as an attempt to sabotage the country’s exports amid economic downturn.

They demanded of the government to continue the RCET for export-industries in a bid to help provide them with a level-playing field against the country’s global textile competing nations.

“Export is the only sector performing and earning forex in current economic debacle,” Patron In-Chief, Muhammad Jawed Bilwani and Central Chairman, Muhammad Babar Khan of Pakistan Hosiery Manufacturers & Exporters Association (PHMA) said.

A decision to cancel the RCET will collapse the national exports, as continuation of the facility will help underpin the falling economy, they said.

The continuing political instability has also brought the trade and business activities to a halt, they said, adding that the commerce and industrial sectors stand “crippled” with the stock market crashing several times, as inflation soars to the record hike and rupee touches the lowest levels against the dollar value.

Amid the economic crisis, they said, only the exports sectors are performing sector to earn forex with the highest employment. The cancellation of RCET will also put billions of rupees investments of the textile sector at stake, they said.

They asked the federal government to freeze the RCET at least on a yearly basis to help the textile exporters finalize their orders with the foreign buyers for six months or a year in advance.

“Any abrupt change and increase in between the year will jeopardizes their entire planning and they suffer huge losses to keep up commitments to their foreign buyers,” they said.

They asked the government to help augment the country’s exports sectors for foreign exchange earning instead of relying on the global monetary institutions to govern the nation.

They said that the textile sector achieved the highest share of 61 percent in the country’s total exports to $19.4 billion in 2021-22 with an increase of over 25 percent.

The PHMA represents knitwear in textile group, which posted the highest ever export growth to $5.1 billion in 2021-22, up by 26.5 percent. Total national exports were $31.79 billion with an increase of 25.64 percent in 2021-22 comparing to the exports in 2020-21, they added.

The economic downfall over the last six months has pulled down textile exports by 7 percent and the overall exports by 5.73 percent. “If RCET is discontinued it will impact in further decline in export of five big export sectors,” they said.

A news item, which they cited about a demand from the IMF making the incumbent government to scale up the RCET rate for the exports sectors, which they said to have made the value-added textile sector “distressed”.

The government is increasing the gas and electricity tariffs by 34.31 percent, from Rs819 to Rs1100 and 30 percent for captive power of export industries from Rs852 to Rs1100 retrospectively from Jan 1 2023, they said.

The government has also decided to revise electricity tariff upward for the export-industries from March 2023.

Copyright Business Recorder, 2023