Industrial Support Package: Rs 3 per unit subsidy to be extended for another three months

The federal government has decided to extend the duration of Rs 3 per unit subsidy under Industrial Support Package (ISP) for another three months on the insistence of textile sector, well informed sources told Business Recorder.
Giving the background, the sources said, on June 7, 2017 the ECC had considered the subject on a summary of Water and Power Ministry Division. It approved a mechanism in the form of a policy directive to NEPRA for inclusion in base tariff for the purpose of cross subsidy that may be worked out for the ISP beyond claims of June 2017; and prospective recovery of ISP claims may be made under the mechanism proposed and adjusted in tariff and subsequent claims of subsidy through the same policy directive.
According to sources, in order to implement the decision, Finance Division was requested by the Power Division for retrospective release of ISP claims till June 2017 because, if ISP claims were not released immediately, the sector was not in a position to continue as announced by the Prime Minister. In response Finance Division only released Rs 12.640 billion against the claims of Rs 23.194 billion after netting negative Fuel Price Adjustment (FPA) of corresponding month.
ISP in case of KE has not yet been released. New tariff for FY 2015-16 has been approved by the Cabinet and Ministry of Energy (Power Division) was not in a position to impose new surcharges in order to cross subsidize the package on other consumers. Further, the new Generation, Transmission and Distribution of Electric Power Bill 2017, has been passed by the National Assembly and Senate of Pakistan. Since the Bill has not yet attained its assent from the President, it was difficult to frame the mechanism in the form of policy directive to Nepra for inclusion in the base tariff for the purposes of cross subsidy for working out the ISP claims beyond June 2017.
On April 12, 2018, the Power Division submitted following proposals for consideration and approval of the ECC: (i) the payment of ISP claims after cross subsidizing against negative fuel price adjustments may be made till December 2017; and (ii) owing to financial difficulties, the support package may be discontinued after December 2017 till improvement in the financial health of the sector.
During ensuing discussion, the Minister for Commerce & Textile, Pervaiz Malik stated that prior consultation was not made with Commerce Division on the proposals of the summary. He further stated that he did not agree with the proposal regarding discontinuation of ISP after December 2017. He was of the view that due to government incentives, exports had increased considerably. In March, 2018, exports increased by 24 % over corresponding period of last year, which is a big achievement of the present government. He further opined that if ISP is discontinued, then it will cause a serious impact on the development of Industrial Sector, resultantly, growth of exports will be hampered. He recommended continuing the ISP.
The Advisor, Finance, Economic & Revenue (now Finance Minister) endorsed the views of Minister for Commerce. He proposed that prior to taking any decision on the proposal regarding discontinuation of ISP after December 2017, a committee may be constituted to analyze its impact and sustainability. The Prime Minister agreed to the proposal.
The Economic Coordination Committee of the Cabinet considered the summary submitted by the Power Division regarding the Rs 3/Kwh subsidy announced by the Prime Minister for the Industrial Sector and decided to continue the existing rate of subsidy.
The EEC further constituted a committee comprising of Finance Minister (convener), Minister for Commerce & Textile, Chairman, Board of Investment (BoI), Secretary, Finance Division, Secretary, Power Division and Secretary, Commerce Division to analyze the impact and sustainability of ISP in a holistic manner supported by data and submit a report thereof to the ECC by April 17, 2018.
The sources said the committee has finalised its recommendations which are expected to be submitted to the ECC on Tuesday (today) on the basis of which Rs 3 per unit ISP will be extended for another three months.