KARACHI: All Pakistan Textile Manufacturers Association (APTMA) has said that some small trade association has been politicising purely economic issues, which it finds regrettable. It said the real economic issue which has caused such an “uncalled outburst” is the revaluation of the rupee from 165 to 152 to a dollar, which has squeezed the profitability of the entire value chain, including the yarn manufacturers.
APTMA is the premier trade organisation of the textile sector with members responsible for 60 per cent by value of all direct exports. APTMA membership includes representation from all segments of textile value chain: spinning, weaving, knitwear, garments, home textile etc., as well as vertically integrated concerns.
According to APTMA, the monthly yarn production is 200,000 tons with a consumption of 1.3 million bales per month which makes the annual consumption approximately 15.5 million bales per year.
The government has introduced a 0 per cent duty tax to ensure that merchants can compete with international prices. Out of this, only 6 million bales were produced domestically, and the balance had to be imported at international prices from the USA, Brazil, and West Africa this year. 200,000 tonnes of yarn production has been kept constant.
It further said that the spinning industry consumes 100 per cent of 30,000 tonnes of synthetic fibers produced in the country. 200,000 tonnes yarn is produced from cotton and synthetic fibers monthly out of which only 100,000 tons of yarn is consumed by value added per month balance is surplus exported in form of 60,000 tons of Fabric and 40,000 tons of yarn every month.
There is no question of shortage of yarn or fabric as it is in surplus, APTMA said. As per the free market mechanism, the buyers only need to pay international prices of the products to the value chain, but the so-called value-added sector of knitwear and woven garments are unwilling to pay international prices of yarn and fabric, it added.
APTMA said that it is completely baseless that yarn rates are above international rates. The export sector already has the facility to import yarn for re-export of products free of duty from anywhere in the world except India, it added.
It said that export refinance is available to the value-added sector at a mere 3 per cent and should have been spent on purchasing yarn and cloth. The sector would not be reaching out to the government for additional support. Approximately Rs1 trillion has been acquired by the value-added sector in the name of export refinance for the procurement of yarn that would have given them enough stock for at least six months, but there is no stock of yarn or fabric currently available with the companies, suggesting that the funds were utilised elsewhere.
Export refinance availed by value-added sector must be audited to see whether the credit is utilised for the purpose it was meant to be, APTMA demanded. Cheaper yarn as is claimed could have been imported but was not done so. It would be interesting to find out on what items this concessional finance has been spent – there will be “nasty surprises,” it claimed.
APTMA claimed that spinners imported cotton when cotton prices were high (90 cents/lb) and the exchange rate was $165. Currently, cotton is at 80 cents and the exchange rate is $152.
The combined effect of this is that raw material (cotton) that has been imported is 22 per cent more expensive but the yarn manufacturers had to adjust pricing in line with the lower cotton price and exchange rate, taking a hit of approximately 10 per cent on the realised value of yarn.
The rupee appreciated against the dollar by 8 per cent and thereby squeezed the textile sector by reducing the amount of rupees they would have received. In a business that is volume-based with small margins, large scale unforeseen appreciation has wiped out profitability. The failure to hedge against exchange rate fluctuation is a business decision and neither the government nor anyone else can be held responsible, APTMA said.