KARACHI: All Pakistan Textile Mills Association (Aptma) has held IPPs responsible for higher electricity tariff in the country and said the high capacity payments to IPPs have jeopardized the country’s economy.
Addressing a press conference on Thursday at Aptma house Karachi, Zahid Mazhar Chairman Aptma Southern Zone Region said that measures taken in the Federal Budget FY25 are anti-exports that will lead to deindustrialization in the country and directly hit the exports.
Textile sector has been badly affected by the higher cost of doing business and some 30 percent of the textile industries have been closed as they were unable to compete in the world market, he said. On the occasion former Chairman Muhammad Yasin Siddik, Amanullah Kassim and other members were also present.
“The only way to overcome this crisis is that the federal government must facilitate the export sector by introducing the export friendly policies and reducing the cost of production,” he added.
He said textile industry is the backbone of the country’s economy and contributes to export earnings by 55 percent but completely ignored in the federal budget.
“The measures taken in the Federal Budget are anti-industry and anti-exports and will discourage exports especially textile exports which is the lifeline of Pakistan’s economy,” he added. Despite expensive energy tariff, export-oriented textile industries of Sindh and Balochistan are facing severe problems of inconsistent supply of gas and electricity. High gas and electricity tariffs are unacceptable, unviable and disastrous for the country’s industry and are leading to closure of industrial units.
He expressed concern over massive payments to Independent Power Producers (IPPs) on account of capacity charges and said capacity payment to IPPS is the main reason behind high industrial electricity tariff and most of them are underutilized and are operating under 30 percent of their production capacity.
Mazhar maintained that the total production capacity of electricity installed in Pakistan is 43,400 megawatts against the total distribution capacity of 22,000 megawatts out of which usage is only 13,000 megawatts. Chairman Aptma Southern Zone said that the high-capacity payments to IPPs have jeopardized the whole economy of the country, therefore the government immediately canceled or reviewed contracts with unnecessary IPPs in the larger interest of 240 million people of Pakistan. He also demanded a forensic audit of IPPS for receiving massive payment on account of capacity charges.
In 2015 capacity payment cost was Rs. 200 billion while for the same 13,000 megawatts has reached Rs.2 trillion in 2024, he added.
There are around 100 IPPs in Pakistan, out of which 52 percent are owned by the government, 28 percent by the private sector, making 80 percent of them Pakistani-owned and the rest 20 percent are owned by foreign companies.
Mazhar urged the government to purchase electricity from cheapest power producers without any capacity charges in the best interest of its people and to make its exporters competitive in the international market.
The major hurdle in the economic growth is the capacity payment to IPPs, which should be discontinued without any delay of time so that energy be available at regionally competitive prices, he demanded.
Since the balance of payment position of Pakistan is very weak and the only solution to solve this problem is to increase exports on a fast-track basis instead of joining the IMF loan program. The government has set the target to increase exports to $ 60 billion in the next 3 years, out of which the target for textile exports is around US$ 33 Billion. This is only possible if export friendly policies are adopted and cost of doing business is brought down substantially, he said.
Chairman APTMA Southern Zone also highlighted the higher interest rate issue and 19.50 percent policy rate is directly hurting the industrial activity as the cost of doing business has risen sharply due to higher interest rate.
“The government should align the interest rate with regional economies where the rate is 6 percent to 7 percent to create a competitive and conducive environment for export-oriented industries to grow,” he demanded.
He said the government in the budget has withdrawn the facility of zero-rating of sales tax on local inputs for exports manufacturing through export facilitation scheme (EFS). In addition, a high tax collection target is a burden on the existing taxpayers. No serious efforts have been made to broaden the tax base, he added.
He said that the budget will fail to revive investment and provide a level playing field to the export sector like textile exports, as growth in exports is the only sustainable way to balance the external account.
The government has increased income tax rates for salaried individuals in the budget for the fiscal year 2024-25. It would directly impact the take-home pay of the inflation-burdened salaried class. Furthermore, incidence of tax on the salaried class in Pakistan is three times higher than in India, Mazhar concluded.
Copyright Business Recorder, 2024