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Knitwear sector struggles to survive energy crisis

Knitwear, the most vibrant value added export sector of the country, is struggling for survival as prolonged power outages and high energy costs is making them uncompetitive in the global market.

“It very depressing that one of the most modern and high tech knitwear unit of Punjab, owned by former governor Punjab, has closedown due to this crisis,” said Adil Butt, a leading knitwear exporter.

He said his company had doubled its production capacity last year but the entire new expansion has not been geared into production.

“The international prices offered for our products are too low to warrant producing them from alternate sources of energy and power,” he said, adding that the margins are very thin even if the knitwear products are produced from normal power and energy sources.

Butt said that inability to commission the newly built knitwear unit into production means that around 7,000 new workers have been deprived of employment. “Two years ago, we were paying up to seven or eight bonus or ex-gracias per annum to our workers,” he said, adding that the bonuses have almost stopped this year.

He said the workers understand that it is more important the company survive in difficult times that would at least protect their jobs. “I am optimistic and I am certain that the energy crisis would be resolved through good governance,” he said.

Another knitwear exporter, M I Khurram said that there is a regular six hours power shutdown daily in industrial areas of Punjab. However there are numerous unscheduled power outrages that cause enormous production losses. He said gas supplies remain suspended for almost six months a year.

He said there is no shortage of export orders but the exporters accept only those orders that they could execute on normal gas and power supplies. He said he has not made any expansion in knitwear for the last four years. “I am struggling even to operate my existing capacities, so how can I think of expansion,” he said.

Khurram said the low global prices are because of Euro crisis in Europe and uncertainty in US economic recovery. “Our competitors are accepting the low priced orders because the cost of doing business is comparatively lower than Pakistan,” he added.

He said: “this includes our neighboring countries like India and Bangladesh”. He said government of these countries took notice of declining trends in textile prices and provided incentives like export rebates lower interest rates etc.

He said in contrast the planners in Pakistan ignored the pressure that the textile particularly value added exporters were facing globally. He said the minimum wages in past four years have doubled while there has been no increase in productivity.

He said interest rates have remained much above 14 percent for the businesses. He said financial charges are now a major component of cost of production.

Former chairman Pakistan Hosiery Manufacturers Association Shahzad Azam Khan said the planners in Pakistan have announced numerous incentives for the exporters but none of those incentives were implemented.

He said more than 50 percent of the knitwear capacity in Pakistan has closedown. “In recent months the most reputed concerns are also slowly closing down their capacities,” he said.

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