Energy Crisis Hampers Pakistan Textile Production

Pakistan continues to face a growing energy crisis adversely affecting the efficiency of its textile sector.

Appeared In
Special Issue
WWD Sourcing Horizons issue 05/13/2008

LAHORE, Pakistan — Pakistan continues to face a growing energy crisis adversely affecting the efficiency of its textile sector.

This story first appeared in the May 13, 2008 issue of WWD.  Subscribe Today.

Samir Saigol, co-chairman of the All Pakistan Textile Mills Association Committee on Energy, said about 70 percent of the organization’s membership is on gas-based power, while the remaining 30 percent relies on electricity. Gas was not available for most of the past winter, while electricity load shedding has been imposed upon the industry since January, varying from two to four hours during the peak hours of 6 to 10 p.m.

“The industry is hard-hit by the energy crisis, and nonavailability of energy is resulting in production losses, machinery breakdowns, more B-grade production, and impacting machine and labor productivity, all of which have a significant impact on costs,” Saigol said. “APTMA is negotiating with the government to seek relief for the export-oriented textile industry. With respect to gas, the government provides gas at subsidized rates to the domestic and fertilizer sectors. To make matters worse, there is unchecked growth in new domestic connections, particularly for CNG gas stations.”

Saigol said the textile sector is bearing the brunt of these “cross subsidies” in the form of higher gas prices. He noted that the Oil & Gas Regulatory Authority is currently considering a further 30 percent increase in gas prices on July 1.

“It’s much the same story with electricity, where not only are our members having to face daily load shedding from four to six hours, but also the rate of electricity for industrial connections has been increased by 30 percent since February 2007,” he said.

Saigol said that while the government acknowledges the importance of Pakistan’s textile industry, it still resorts to industrial load shedding at the first hint of a power shortage.

“The country’s energy crisis will continue into the near future till the construction of new dams, purchase of electricity from Iran and the planned Iran-Pakistan-India gas pipeline” Saigol said.

He said the APTMA will continue to push for preferential treatment for the textile sector, which accounts for 60 percent of exports, 38 percent of industrial employment and more than 10 percent of gross domestic product.

Azfar Hassan, president of Matriz, a Lahore-based supplier of knit, woven and denim tops and bottoms to U.S. brands such as Izod, Blue Marlin, Tommy Hilfiger, Eddie Bauer and Mecca DNM, said mills in Pakistan use a combination of energy sources to combat the persistent load shedding.

“In the winter months there is a gas crisis in Pakistan, so mills are forced to use furnace oil to generate power, which raises their energy bill by up to three times,” Hassan said. “In the summer months, there is a significant shortage of electricity, but the gas supply is consistent. Flexibility is key in handling the dearth of energy.”

Hassan said some of the larger mills with clout get special concessions from the government, whereby they are exempted from gas and electricity load shedding, while others have made liquid petroleum gas provisions.

But Saigol said, “I wouldn’t say that smaller mills are necessarily at a disadvantage. It all boils down to the quality and cost of a given mill’s backup arrangements and the ability of the mill to absorb the additional cost of having to run on diesel or furnace oil when their prime source (gas or electricity) is not available. Larger mills with weak balance sheets and insufficient backup generating capacity are just as vulnerable to energy shocks as smaller ones.”

Najeeb Malik, managing director of Master Textile Mills Ltd., a sizeable vertically integrated apparel manufacturer based in Lahore, said, “In normal circumstances when gas is available to us, we generate power on both gas turbines from gas fuel. However, last winter when gas was curtailed due to a shortage, we had to run both our gas turbines on diesel, which was a costly affair. In the context of power generation only, we had to bear a loss of a million dollars in just those three months.”

Malik said currently, Master Textile is working on a coal gasification project that will enable the firm to produce coal gas out of coal that will be burnt inside a gas turbine as an alternate source of natural gas. Since coal gas is cheaper when compared with running gas turbine on diesel, the company will be able to avoid loss of power generation.

“Additionally, we are also working on installing a steam turbine run on coal,” said Malik. “Regardless, we’ll have to suffer a huge loss again in the coming winter due to gas curtailment, as the projects require at least a year and a half to mature.”