In its second meeting held here on Monday, the members of the committee felt acute need of subsidising the sector if the government wants the industry to compete internationally. The report presented by Zubair Motiwala showed that the industry was compensating for agriculture sector's gas consumption along with some other industries of Pakistan like cement etc.
The subsidised gas to fertiliser plants, which is also their basic raw material, as per report is charged Rs 36.77 to Rs 73.99 per MMBTU, whereas textile and cement units are over-charged at Rs 264.89 per MMBTU and Rs 307 per MMBTU, respectively, compensating for fertiliser industry. This cross-subsidy is one of the main factors, which has made the textile sector non-competitive in the international market, it observed.
By virtue of subsidy to fertiliser plants, a revenue of Rs 14 billion is lost every year. According to banks' evaluations, the benefit never reaches the farmers, it added. The increase of Rs 56.33 MMBTU in price of gas within one year from Rs 208.56 to Rs 264.89 has crippled the textile industry, which is in great fear of losing its export further to its strong competitors like China, India, Bangladesh and even Cambodia, which are gaining momentum in their exports.
Pakistan used to be the champions of bed wear items, though still managing to be on the top has lost 32 percent business in value over one year, whereas China has improved with 98 percent and India with about 50 percent.
The overall decline in the textile industry is 13.43 percent with over $1.9 billion exports in September 2005 dropping to over $1.65 billions in September 2006. In the last three months from July to September 2006, this figure has dropped to 10.33 percent as compared to same period of last year.
The only sector in the textile not yet affected is yarn, because Pakistan is a cotton growing country, but as far as fabric or value added items are concerned Pakistan export graph is continuously dropping quite alarmingly in all the manufacturing categories of textile, it added. The textile industry is seeking relief at least in one out of 14 tariffs. The relief on gas could give some relief to the textile units, which would then be somewhat competitive in the international market.
The report shows that in the last four years only the gas tariff was revised many times. In 2002, the gas price was Rs 166.18 per MMBTU, in July 2005 it reached to Rs 208.56 per MMBTU, which was raised to Rs 240.91 per MMBTU in January 01, 2006 despite interim orders of Oil and Gas Regulatory Authority (Ogra) notifying price of Rs 227.96 per MMBTU. In July, 2006 the rates have jumped to Rs 264.89 per MMBTU.
The prices of gas have seen such a drastic increase, which the report says, is due to linkage to international oil and furnace oil price, the guaranteed return of 17 percent and 17.5 percent to SSGCL and SNGPL respectively on average net fixed assets (ANFA), a source of revenue for the government under Gas Development Surcharge (GDS).
In addition, the report highlights the fact that subsidy to domestic consumers and fertiliser industry burdened the industrialists, who are consuming 80 percent of the gas. The burden kept on creeping, as the prices in the two sectors almost remained constant. The impact of this cross subsidy on the textile sector was 19 percent, said Motiwala.
The report also emphasised the government policy of linking gas price with that of oil in theoretical terms, which is wrong as Pakistan is producing gas indigenously as its natural source. Citing oil producing countries like Saudi Arabia, Iran, it said, which are selling oil to community at one fifth and one tenth of international price respectively.
It further said that Iran has not changed the price of gasoline since 1979. Further, Holland sells its gas to community on much cheaper rates than imported oil and its gas-oil parity does not correspond to international parity, it adds.
It further claimed that Bangladesh sell gas to its industries with 35-40 percent cheaper than Pak rates and do not subsidise on account of other industries, the government pays for the subsidies from its own coffers, it added.
According to the report, on account of revision of gas wellhead price of Quadirpur gas field, Ogra on September 27 2006 revised downwards the gas tariff on industrial sector by Rs 26.45.
If the government does not notify this, the benefit of Rs 16.203 billion and Rs 8.069 billion to SNGPL and SSGCL respectively will not be transferred to the consumers. The total benefit of Rs 24 billion, would go to the government as additional revenue, it added.
The textile industry, which is the largest employment sector in the country, must not be neglected. This industry has many sections starting from yarn, spinning, weaving, dyeing etc, which have further categories and responsible for creating large number of jobs, expectedly one million, according to Motiwala.
The members of the committee said that the utilities are never, and should not be, the revenue source; rather these are the facilities to be given to the people and for business development, which in return would generate employment opportunities.
Many of the committee members including representatives of the textile sector were of the opinion that spinning industry is the major contributor in the textile and must be given maximum relief.
Pervaiz Malik MNA, while talking to Business Recorder said that on August 26 Prime Minister Shaukat Aziz realising this important textile section directed for special package, but after passage of three months no action is on sight.
Shafqat Ellahi Sheikh Chairman All Pakistan Textile Mills Association (Aptma) added that "we would be facing a tsunami in about one year's time when the embargo of World Trade Organisation (WTO) would be lifted from China on January 1, 2008, which would have a sweeping effect on our exports".
The minister and the other government officials realizing the gravity phase from which the textile sector is passing, despite their reservations on some of the contents of the report agreed to work on the revival of the industry, which is in the best interest of the country.
The meeting chaired by Nazir Ahmed Jatt was attended by Minister for Textile Mushtaq Ali Cheema, Secretary MINTEX Syed Masood Alam, Haroon Ihsan Piracha, Ahmad Raza Maneka, Sahibzada Muhammad Mehboob Sultan, Farid Ahmad Paracha, Yasmin Rehman, Chaudhry Manzoor Ahmad, Muhammad Pervez Malik, Maulana Rahmatullah Khalil, Ghalib Hussain Domki, Muhammad Farhan Latif, Syed Amir Ali Shah, Ayaz Ali Shah Sherazi, Liaqat Ali Marri, Iqbal Muhammad Ali Khan, Asiya Nasir and Nayyar Sultana.
The meeting was also attended by representatives of other stakeholders like CBR, SNGPL, SSGCL, OGDC to review the status of the textile industry and help it out of the crisis situation.