KARACHI: While stressing an urgent need for a review of electricity prices and new taxes, trade and industry leaders have dismissed the government’s $60 billion export target in the next three years, describing it as nothing more than a slogan for public consumption.
“We are not booking orders. The cost of production has gone beyond the imagination of the exporters, and even the government is not taking the gravity of the situation seriously,” lamented Amir Aziz, a manufacturer and exporter of textile finished products, adding that achieving the ambitious target is not a reality.
Last month, Prime Minister Shehbaz Sharif tasked authorities with increasing annual exports to $60bn within three years.
Industry leaders say the government is projecting unrealistic targets for public consumption to hide the steeply declining economy, particularly exports. They expressed their resentment over harsh taxation, particularly on exporters’ income.
Exporters rejecting orders due to high production cost
The All Pakistan Textile Mills Association (Aptma) on Thursday demanded that the government reduce interest rates to 6-7 per cent to align with regional economies.
On July 29, the State Bank reduced the interest rate by 100 basis points to 19.5pc, but the exporters and all other stakeholders said it was too high for doing business.
Aptma South Zone Chairman Zahid Mazhar said that over 30pc of textile mills have closed due to excessive energy costs and sky-high interest rates. Many others have curtailed production by up to 50pc.
On Friday, Sindh Chief Minister Syed Murad Ali Shah said that industries were rapidly losing viability, and there were reports of closures as electricity tariffs had gone way too high.
He said that electricity produced by the Nooriabad Power Plant cost Rs15 per unit, but it was being provided to industrial units at Rs48 per unit, which affected industrial establishments and led them to consider closing down.
Karachi, the capital of Sindh, is the country’s economic nerve centre, contributing up to 70pc of tax revenue to the national exchequer. According to media reports, many industrialists relocated their businesses abroad, particularly to Dubai, during the last two years.
The textile sector, which accounts for over half of the overall exports, has been struggling to compete internationally. Its export proceeds declined to $16.7bn in FY24 from $19.3bn in FY22.
Exporters blamed the rising input prices, mainly power tariffs, which surged to 15-17 cents per kWh from 6-9 cents back due to unutilised capacity costs, rendering Pakistani goods uncompetitive on world markets.
The budget has increased the tax on export proceeds from a 1pc fixed tax regime to 2pc advance tax on export proceeds, adjustable against a 29pc tax on profits plus a 10pc super tax.
“A leading spinning mill closed last week in Karachi. More than 150 people lost their jobs. The market is already short of jobs due to the economic slowdown,” said Shakil Anwar, a textile director working for a large group.
He said the joblessness was increasing rapidly with the closure of mills because the surging cost of doing business had badly crippled industrial activities.
“Pakistani manufacturers are struggling with 19.5pc interest rate, which is too high compared to the 8.5pc in Bangladesh and 6.8pc in India,” he said, warning that exports would see a significant decline in the current fiscal year.
Published in Dawn, August 4th, 2024
