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Energy shortage & other issues hits viability of textile industry
06
Aug '11
Chairman All Pakistan Textile Mills Association (APTMA) Gohar Ejaz has said that the energy shortage followed by inventory losses due to sudden decline in cotton price worldwide has hit viability of the industry leading to a crisis-like situation.

He said $10 billion investment on machinery is becoming redundant in the presence of 10 to 12 hours load shedding of electricity and no gas supply of 150 days a year. There is not standby arrangement of electricity and it is very difficult to operate on alternative fuel other tan gas to keep Captive Power Plants operational.

According to him, the cotton season is on full throttle and industry would have to procure one million bales in August, followed by another two million bales in September.

Chairman APTMA said he was due to interact with government policymakers next week to seek seven days a week uninterrupted gas supply to the textile units. Further, he said, he would pursue the government policymakers for special facility for industry by creating liquidity. He said the textile industry has booked huge inventory losses due to stuck up yarn for four months when cotton and yarn prices fell down from $2 to $1. The same situation has come up in India and the Indian government has facilitated its textile industry by providing a special 7.5% rebate on exports and has also facilitated their industry by providing 5% interest rate subsidy on loans. Similarly, Gohar hopes that Pakistan should also support textile industry by a one off 5% mark up rate subsidy on all long term and short term loans to create liquidity and save industry from bankruptcy, which would be crucial for renewal of industry in new cotton season.

He mentioned that the Indian government had also messed textile industry last year by banning export of cotton and yarn. But now India has followed Pakistan's policy of free market mechanism, which was APTMA's vision, to reverse situation and it has given retrospective rebate to yarn manufacturers in view of large cotton crop in order to let them beef up liquidity.

Gohar said this one-time facility of 5% mark up rate on all outstanding loans would create much-needed cash flow, as fall of cotton prices internationally from $2 to $1 per pound has put all players into a difficult situation. The containers for the period of April and July are yet stuck up and there is an urgent need to address liquidity crisis, which may turn into Non Performing Loans (NPLs) if no financial support extended, he added.

He said it is increasingly becoming impossible for industry to operate on 14% plus mark up, especially the textile industry being export industry is the victim of both high rate of interest and inflation, which is not possible for industry to pass on. It may be noted that 1.6 million cotton bales remained unconsumed during last quarter due to three days a week gas closure.

Chairman APTMA said the government has not provided 3% mark up subsidy for over last two years and it is right time to settle this facility by offering 5% mark up on short and long term loans for whole textile chain.

All Pakistan Textile Mills Association (APTMA)

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