- 10 Oct 2022
- ICICIdirect Research
Energy crisis in Pakistan textile industry expected to aid Indian textile exports
The fresh crisis leading to higher cost of production in the Pakistan textile industry owing to increased power cost is expected to open up new export opportunities for Indian companies on the back of improved competitiveness due to incentives announced by the government to boost exports. Unlike India, Pakistan has preferential treatment in terms of duty free access to many developed markets. The Pakistan textile industry has plunged into a new crisis with the electricity board of the country refusing to honour the subsidy offered by the government. The textile players in Pakistan were supposed to get electricity at a subsidised rate of 9 cents/kwh for FY22-23 but the power division has notified that the subsidised tariff will be discontinued from October 1. This will push the power tariff to 20 cents/kwh and can lead to closure of many factories.
Cotton prices easing in India, a stable power tariff and government policies like export incentives, PLI scheme are expected to improve India’s competitiveness in the global textile market and benefit from the stress faced by the Pakistani textile industry enabling Indian exporters to garner a higher market share. Pakistan’s overall textile exports were at US$20 billion (bn) vs. India’s exports of US$40 bn.