Five export-oriented sectors: ECC likely to approve special electricity tariff

ISLAMABAD: The Economic Coordination Committee (ECC) of the Cabinet is expected to approve special electricity tariff for five export-oriented sectors including textiles beyond June 30, 2020. A couple of days ago, Prime Minister Advisor on Commerce and Investment, Abdul Razak Dawood in a tweet stated that the summary will be placed before the ECC, in its next meeting.

Power Division has not yet sent the summary to the ECC but it is expected that after late night contacts, it will be tabled during the meeting with the permission of Finance Advisor/ Chairman ECC.

On March 11, 2020, Economic Coordination Committee (ECC) of the Cabinet had extended special electricity tariff at Cents 7.5 per unit, aimed at giving relief to the five erstwhile zero-rated sectors i.e. textile, surgical goods, carpets, leather and sports goods, after hectic discussions and consultations between industry and public sector stakeholders some of which were obviously against continuation of special tariffs of electricity and gas.

However, the government, which was under pressure partly due to Prime Minister's direct contacts with the textile sector, decided to extend the special relief package at all-inclusive rate of Cents 7.5 per cent from July 1, 2019 to June 30, 2020. The Finance Ministry, sources said, has not paid agreed subsidy of Rs 23 billion for the fiscal year 2019-20.

The government also decided that electricity bills issued from January 2019 till date which include surcharges, quarterly adjustments, fuel price adjustments, Fuel Cost Component (FCC) and Neelum Jhelum Surcharge are to be adjusted to fixed tariff at Cents 7.5 kWh(per unit). All taxes of the period are to be paid by consumers in addition.

The ECC had decided that Finance Division will pay Rs 23 billion as subsidy for FY 2019-20 to the Power Division in the first week of July 2020 with Rs 14 billion to be paid out of the Rs 24 billion budgeted allocation for the gas sector, whereas, Rs 9 billion will be funded through savings from various heads of PSDP.

The ECC further decided that for continuation of relief package in FY 2020-21, additional subsidy would be capped at Rs 20 billion. The special relief package which was approved by the ECC after many ifs and buts and immense consultation, expired on June 30, 2020.

The sources said, Power Division, which deals with tariffs, also sought opinions of Ministries of Finance, which is to pay subsidy, Ministry of Commerce and other concerned stakeholders on extension of special relief package in the light of ECC decision in which Finance Division was directed to earmark Rs 20 billion for this purpose. However, only Commerce Ministry responded on the summary with the request to continue the special relief package for the five export oriented sectors.

The sources said, Power Division, has also supported the Prime Minister's initiative of special tariff for five export oriented sectors, but it was unable to continue until federal government assures provision of subsidy amounting to Rs 20 billion.

The Power Division argues that it was not feasible for it to cross subsidize the industry as the power sector is already under severe financial constraints. The textile sector which previously made hectic efforts for the continuation of special package inclusive of all taxes, is confident that the special relief package will be extended soon.

All Pakistan Textile Mills Association (APTMA) has claimed that textile exports have registered a growth of 14.3 per cent in July 2020. The Association has also sought Prime Minister's attention on the following issues: (i) continuation of regionally competitive energy tariffs; Cents 7.5/ kWh for power, $ 6.5/ MMBTU RLNG and Rs 786/ MMBTU domestic natural gas for export oriented sectors;(ii) financing scheme on pattern of new industry financing as per circular for reviving $ 2 billion closed capacity; and (iii) extend LTFF and ERF to cover the entire value chain including SMEs and indirect exporters.

Copyright Business Recorder, 2020