Textile: Nails in the coffin

Things really hit the fan last week when APTMA announced the voluntary closure of textile mills. On Friday, it was reported that around 30 percent of textile mills had shut down their operations owing to lack of competitiveness.
Time and again, this column has listed the ongoing problems that textile mills are facing - depressed cotton and yarn prices, competition from regional players like India, lacklustre demand from China. These are things that are out of ones hands. But what of the things that are within the governments control? What of loadshedding? What of the high cost of doing business?
An industry source told BR Research that Punjab - home to the textile industry of Pakistan - is the most troubled region, where mills face over 8 hours loadshedding of electricity on average. Although one could argue that some textile mills have set up in-house power production, an industry source says that such firms form a very small portion of the overall industry. And to add insult to that injury, Finance Bill 2015/16 has raised electricity tariffs and there is now also a ariff rationalization surcharge, which has brought the electricity tariff for the textile industry to Rs14.5 per kilowatt hour from Rs9 per kWh in May 2013.
Where other countries subsidize their industries, Pakistan chooses to tax the daylights out of them. The rebates and refunds are untimely; there are cesses and super taxes. And the latest 0.6 percent WHT on banking transactions to broaden the number of filers harms pretty much any and every industry under the sun.
Islamabad Chamber of Commerce and Industry told BR Research that local textile firms are setting up shop abroad simply owing to the non-conducive business environment that the FBR has created. At a time when textile was already dying because of the high cost of doing business, the new fiscal year has brought with it policies that, as is becoming obvious by the voluntary closure of mills by APTMA, might just put the whole industry to rest. Textile accounts for nearly 60 percent of Pakistans total exports. Something needs to be done, and quick.