Pakistan's power regulator has approved a 16.68% increase in retail electricity prices and a 23.96% hike in transmission charges, adding fresh cost pressure on the country's textile and apparel exporters. The impact will be most severe on spinning, weaving, and dyeing mills, where electricity accounts for 25-30% of total operating costs. For a medium-sized cotton spinning mill, the monthly electricity bill will rise by approximately 150,000 to 200,000 Pakistani rupees, translating into an annual increase of over 2 million rupees. The total additional cost for the entire textile industry is estimated at more than 20 billion rupees per year, equivalent to 5-8% of the sector's annual profit.
Industry Impact
The spinning and weaving sectors are the first to feel the squeeze. Pakistan is the world's fourth-largest cotton producer and a major exporter of cotton yarn. The cost of producing one ton of yarn will increase by 3-4%, eroding the country's price competitiveness. Dyeing and finishing mills face even steeper challenges, as their energy consumption is particularly high. Factories in Karachi and Faisalabad, the main dyeing hubs, already operate at 60-70% capacity; the new tariffs may push some small-scale units to shut down.
Garment factories operating on net margin contracts with international brands will find it difficult to pass on the cost increase. With profit margins already squeezed to 5-8%, the electricity hike could shrink margins below 3%, making some orders unprofitable. From a regional perspective, Pakistan's cost advantage is fading. Bangladesh, with lower electricity tariffs (around $0.08/kWh) and labor costs, continues to attract garment orders away from Pakistan. China and Vietnam, despite higher electricity costs, benefit from more integrated supply chains and higher productivity, partially offsetting the disadvantage.