KARACHI/LAHORE: The escalating cost of doing business in Pakistan has triggered a wave of deindustrialization, with internal reports confirming that over 100 major textile units have ceased operations across Sindh and Punjab.

A detailed list of closed units, reviewed by this publication, reveals that the crisis has moved beyond small enterprises to engulf established industry giants. The document lists closures in key industrial hubs including Nooriabad, Kotri, Raiwind, and Faisalabad. Prominent names on the list include Sapphire No. 1 (Kotri), Crescent (Nooriabad), and Colony Spinning (Raiwind), alongside a reported 50% operational closure of Gul Ahmed Group.

This data corroborates urgent warnings issued by the All Pakistan Textile Mills Association (APTMA) and the Federation of Pakistan Chambers of Commerce and Industry (FPCCI), who argue that the current economic regime is rendering Pakistan’s exports uncompetitive globally.

The "16-Cent" Energy Trap

The primary driver of these closures is the prohibitive cost of energy. Gohar Ejaz, Patron-in-Chief of APTMA and former Caretaker Federal Minister, has been vocal about the energy tariff disparity that is crippling the sector.

According to Ejaz, the industry is currently being forced to operate at approximately 16 cents/kWh, while regional competitors like India, Bangladesh, and Vietnam supply energy to their industries at 9 cents/kWh.

"The industry is not viable at energy prices of 16 cents/kWh. We are handing over our export orders to our rivals simply because we cannot price our goods competitively," Ejaz stated in a recent appeal to the government. He estimates that this disparity is costing Pakistan nearly $5 billion in potential export capacity annually.

• Reference: APTMA warns of industrial collapse due to energy tariffs - Business Recorder

A Liquidity Crunch: "Catastrophic" Conditions

Beyond energy, the sector is facing a severe liquidity crisis driven by delayed tax refunds and high borrowing costs. Khurram Mukhtar, Patron-in-Chief of the Pakistan Textile Exporters Association (PTEA), has termed the situation "catastrophic."

Mukhtar has highlighted that billions of Rupees in Sales Tax refunds are stuck with the Federal Board of Revenue (FBR), starving mills of the working capital needed to buy raw materials (cotton/yarn) and pay wages. Combined with an interest rate hovering above 20%, businesses are unable to borrow to bridge the gap.

"Exporters are facing a liquidity crunch so severe that they are forced to exit the business entirely. The removal of the zero-rating regime was a disaster that has sucked liquidity out of the market," Mukhtar noted in a recent industry briefing.

• Reference: PTEA demands restoration of zero-rating to save exports - The News

The "Hostile" Environment

The leadership of the FPCCI has also weighed in, criticizing the government's approach to taxation. Saquib Fayyaz Magoon, Acting President of FPCCI, recently stated that the government’s aggressive tax notices and "thieves" rhetoric against industrialists are pushing capital out of the country.

"When you treat tax-paying industrialists like criminals, they will stop investing. We are seeing capital flight to Dubai because the environment here has become hostile to growth," Magoon remarked.

• Reference: FPCCI warns of capital flight due to harassment of business community - Nation

The Data: A Graveyard of Industry

The closures are not theoretical; they are specific and verified. The provided list details the shutdown of spinning and weaving units that form the backbone of the textile supply chain:

• In Sindh: Equity, Suraj, Nadeem, and Sapphire units in Nooriabad/Kotri.

  
  

• In Punjab: Gulshan Spinning (Bahawalpur), Fatima Spinning (Multan), and Ghazi Weaving (Bhai Pheru).

  
  

• These closures represent a massive loss in production capacity, meaning even if export orders arrive, Pakistan may soon lack the infrastructure to fulfill them.

The Way Forward

To halt the complete collapse of the sector, industry stakeholders have proposed a three-point emergency agenda:

1. Regional Competitive Energy Tariffs (RCET): Reduce power tariffs for export industries to 9 cents/kWh to match regional peers.

2. Instant Refunds: Reinstate the Zero-Rated sales tax regime or ensure automatic refund processing within 72 hours.

3. Interest Rate Rationalization: Decouple export financing from the policy rate to make working capital affordable.

Without these immediate interventions, the "closed units" list is expected to double by the end of the fiscal year, turning a temporary downturn into permanent deindustrialization.

UNITS CLOSED IN SINDH

UNITS CLOSED IN PUNJAB