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Signs of recovery in textile sector - LahoreEstate - 10-23-2009 08:44 AM
KARACHI: There are signs of recovery in textile sector induced by the rupee parity against leading currencies and slightly lower prices of raw cotton in the domestic market against world rates, official sources disclosed on Wednesday.
Sources in the textile ministry told Dawn that presently most of the inputs are at par with those of regional countries and it is up to the industry to cut the cost and improve their profit margin through value-addition.
The depletion of the Pak rupee’s value against major currencies has given an edge to exporters over their competitors from regional countries and presently cheaper raw cotton prices have also given space to textiles and clothing exports, sources added.
While agreeing with damages and losses owing to prolonged power outages and gas shortages, the textile ministry sources did not agree that power tariffs in the country are higher than those of the regional countries.
‘How can this be true when furnace oil prices in the world are the same from where each country meets the demand to generate power through thermal power units and tariffs are based on fuel cost,’ the official argued.
Similarly, the ministry sources said most of other inputs are also at par with those of regional countries and if textiles and clothing exports have to be competitive, the only way is to go for higher value-addition.
Citing an example, sources said if China is presently having a value-addition of up to $4 billion on processing one million bales, no amount of official assistance from the government to the industry could meet this gap.
Similarly, they cited that India is doing value-addition of up to $2bn on processing one million bales whereas in Pakistan our industry is doing value-addition of only $1bn on equal quantity of cotton.
Therefore, one can easily reach a conclusion that Pakistani exporters are doing the least value-addition against their major competitors of the regional countries, sources in the textile ministry said.
As a result of this, sources said the profit margin or cost per piece of textile and clothing is equally squeezed and this leaves little margin for exporters against their competitors in the world market.
If higher value-addition is made on processing equal quantity of cotton, it would help cover cost on fetching higher prices in the world market, they added.
Nevertheless, sources said there are such units in the country which are doing well as they are meeting all standards in value-addition as well in research work which is paying them well.
However, the industry had been complaining of high mark-up rates and energy electricity tariffs which are rendering them uncompetitive in the world market.
In other countries, exports are zero-rated and no tax is charged which also puts extra burden on cost of finished products, complained Javed Bilwani, chairman, Pakistan Hosiery Manufacturers Association.
http://www.dawn.com/wps/wcm/connect/dawn-content-library/dawn/news/business/09-signs-of-recovery-in-textile-sector--szh-05