PAKISTAN: Textile industry tax to finance gas imports
Authorities in Pakistan have imposed a new tax on the textile industry aimed at providing adequate energy supplies to the sector in the upcoming winter season.
The Gas Infrastructure Development Cess (GIDC) is expected to generate PKR24bn (US$253m) per annum, which the government will use to finance gas imports from Iran, Turkmenistan, Qatar and India.
It is hoped that the measure will resolve the country's energy crisis, which has led to persistent gas and power cuts for the textile industry.
Mills have been forced to close down, lay off workers and default on bank loans because the industry is starved of gas for three days a week even during summer, according to Gohar Ejaz, former chairman of the All Pakistan Textile Mills Association (APTMA).
The textile industry is currently supplied with gas for five days a week but also faces 6-8 hour daily electricity cuts. As a result, around 40% of the textile industry's production capacity is idle and textile and clothing exports dropped by more than 10% in the fiscal year to the end of June 2012.
According to a study by the Pakistan Institute of Development Economics (PIDE), 67.5% of the country's textile firms face delays in orders, 70% have seen lower output, and the sector's overall loss from the breakdown in power supplies amounts to PKR819bn (US$8.63bn).
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