LAHORE, Pakistan — Energy shortages are having a devastating effect on Pakistan mills and manufacturers.
Though electricity and now natural gas scarcity and load shedding are an endemic problem in Pakistan, last month there was no gas supply provided at all to the mills in Punjab. This led to a substantial dip in exports due to mill closures, equaling $6 billion annual export capacity. The lack of gas has been especially detrimental for dyeing and finishing plants, as gas is used to run the boilers, as well as for mills’ electricity.
According to the All Pakistan Textile Mills Association, with high domestic gas consumption, the gas shortage for the industry started in November and led to a 32 percent decline in Pakistan’s textile exports and continued in December with a further 40 percent dip in quantity terms. This includes 26 percent in cotton cloth, 38 percent in knitwear and 6.8 percent in garments. In value terms, December 2011 exports shrank 19.2 percent or $305 million year on year.
The province of Sindh, home to Karachi, did receive its full share of gas and mills there were not affected.
Mill executives in Punjab’s industrial cities of Lahore, Gujranwala and Faisalabad, said gas supply has now been resumed to textile mills for two to four days a week, depending on the city.
“It’s not that we can’t produce at full capacity, we can, but we have to let a lot of orders go due to increased cost of production,” said Fahid Hussain, group brand manager of Crescent Bahuman, in Pindi Bhatian, which produces denim garments, mostly bottoms, for brands such as Levi’s. “This January, we produced only 450,000 garment units compared with 700,000 last January. These orders then go to Bangladesh, India, Cambodia and Sri Lanka, even though we offer a better quality product.”
Najeeb Malik, managing director of Master Textiles, in Lahore, which supplies to Aéropostale and Macy’s, said, “Pakistan textile mills generally work on 5 percent net profit,” adding that with higher alternative fuel costs, the profit has been wiped out, which is why mills in Punjab are shutting down. “If we are not making any money at all, then what is the point of being in business?”
Having previously faced gas-load shedding of up to four days a week during the winter months of high domestic consumption, larger mills have invested in alternate fuels. At Master, the firm recently installed new rice husk boilers at a cost of $334,000. In addition, the mill’s $5 million plant that was generating electricity at a 50 percent savings from that provided by the Water & Power Development Authority is now lying idle. Hence, Master’s energy cost has gone up 75 percent.
Moreover, Malik said, they have faced shipment delays of two weeks, paid penalties to importers and had shipments air-lifted, all cost increases that have to be absorbed by the mill.
Since gas scarcity will linger for the next three months, Crescent Bahuman, located as it is in the middle of the rice growing region, will also use rice husks as an alternative fuel, added Hussain.
Masood Textiles in Faisalabad converted its boilers from gas to corn cob, rice husk and coal in order to not disturb long-term relationships and commitments with importers, said director Amer Hameed, but smaller mills in the city, some 125 to 150, primarily yarn and finishing mills, have closed.
“Luckily, slow retail sales Stateside this holiday season coincided with mills here working under capacity, so some U.S. importers were flexible about short-term (one to two weeks) delays, but others demanded air-lifted shipments and penalties,” Hameed said. “However, to meet U.S. importers demand for higher value-added fashion garments with newer washes and styling, we need our energy requirements to be met first.”