KARACHI: The All Pakistan Textile Mills Association (APTMA) has blamed Independent Power Producers (IPPs) for the country’s high electricity tariffs, stating that exorbitant capacity payments to IPPs have jeopardized Pakistan’s economy. Addressing a press conference at the APTMA house in Karachi, Zahid Mazhar, Chairman of APTMA Southern Zone, criticized measures in the Federal Budget FY25 as being anti-exports, which he warned could lead to deindustrialization and a significant drop in exports.
Mazhar highlighted that the textile sector, which contributes 55% to Pakistan’s export earnings, has been severely impacted by the high cost of doing business. Approximately 30% of textile industries have shut down, unable to compete globally. He called for export-friendly policies and a reduction in production costs to overcome the crisis.
Mazhar expressed concern over the inconsistent supply of gas and electricity to export-oriented textile industries in Sindh and Balochistan, describing the high energy tariffs as unsustainable and disastrous. He attributed the high industrial electricity tariffs to massive capacity payments to IPPs, many of which operate below 30% capacity.
Mazhar pointed out that Pakistan’s installed electricity production capacity is 43,400 megawatts, while the distribution capacity is only 22,000 megawatts, with actual usage around 13,000 megawatts. He urged the government to cancel or review contracts with underutilized IPPs and conduct a forensic audit of capacity charge payments, which have surged from Rs. 200 billion in 2015 to Rs. 2 trillion in 2024.
With 100 IPPs in Pakistan, 80% owned by Pakistani entities and 20% by foreign companies, Mazhar recommended purchasing electricity from the cheapest power producers without capacity charges to make exporters competitive internationally. He stressed the need to increase exports to $60 billion over the next three years, with a $33 billion target for textile exports, and called for aligning Pakistan’s interest rate with regional economies to foster a competitive environment for export-oriented industries.
Mazhar also criticized the withdrawal of the zero-rating sales tax facility on local inputs for export manufacturing through the Export Facilitation Scheme (EFS) and the high tax collection targets, which he said burden existing taxpayers. He warned that the current budget fails to revive investment or provide a level playing field for the export sector, crucial for balancing Pakistan’s external account.
He concluded by highlighting that the increased income tax rates for salaried individuals in FY 2024-25 would directly impact the take-home pay of the inflation-burdened salaried class, noting that the tax incidence on salaried individuals in Pakistan is three times higher than in India.
