New fiscal year starts well for textile sector

LAHORE: After a difficult FY11, the new fiscal year has started well for the domestic textile sector which has been in the thick news lately, ranging from foreign support in attaining the GSP plus status to falling cotton prices, experts said. They said that the SNGPL has also surrendered to APTMA’s demand to restore gas supply to the sector for a period of 5 days a week instead of 4 earlier. If all goes well, textile sector looks to cash in from higher exports to EU and lower manufacturing and operational costs.

Swedish Ambassador to Pakistan Ulrika Sundberg has said that Sweden is making all the efforts to help Pakistan achieve the GSP plus status. To recall, Pakistan was to get the facility in January but has been denied at the World Trade Organization (WTO) forum due to objections from India and other neighbouring countries. Nonetheless, efforts are being put in to resolve the issue and get the GSP plus status for Pakistan. Lately, the UK has also supported Pakistan’s position in attaining the GSP plus status. EU contributes 27 percent of the total textile exports of Pakistan and if the facility is approved, Pakistan’s exports are likely to boost by Euro 900mn.

After pressure from the APTMA, SNGPL has withdrawn the 3 day gas suspension schedule for the textile industry. Effective from July 10, 2011, the entire textile chain will get uninterrupted gas supply for a period of 5 days instead of 4 which SNGPL had announced earlier. We believe the move would somewhat ease off the cost pressures as increased gas supply will reduce the reliance on expensive fuels such as diesel.

Peaking in 3QFY10, cotton prices have come down significantly in the domestic market to stand at Rs 6,800 per maund. Internationally as well the prices have shown a similar trend based on lower mill demand from China and better crop expectation in the ongoing fiscal year. This could reduce the sector’s reliance on short term borrowings to finance raw material procurement leading to lower burden of financial charges in the future.

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