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ISLAMABAD: Commerce Ministry has sought firm commitment from Finance Ministry for provision of funds to ensure electricity supply to five export oriented sectors at Rs 19.99/ kWh all-inclusive instead of US 9 Cents till June 30, 2023, sources close to Secretary Commerce told Business Recorder.

Sharing the details, sources said, the government provided regionally competitive energy tariffs, i.e., electricity at US cents 7.5 per kwh during Jan-Aug 2019-21 and US cents 9 per kwh during Sep-Jun 2021-22 and RLNG at $6.5 per MMBTU during Sep-Jun 2018-22 to export-oriented sectors with the objective of keeping them internationally competitive by reducing cost of manufacturing and boosting exports.

Such measures including others provided a launching pad to export-oriented sectors and resultantly Pakistan's exports reached a historical high level of$ 31.8 billion in FY 2021-22 as compared with preceding years.

The Economic Coordination Committee (ECC) of the Cabinet on July 25, 2022 considered a summary titled "Regionally Competitive Energy Rates for Export Oriented Sectors during FY 2022-23 (effective July 1, 2022)” and subsequently the Cabinet ratified the ECC'S decision July 27, 2022).

In case of electricity, the decisions recorded were as follows: electricity will be provided at US cents 9 per kWh all-inclusive to five export oriented industries subject to subsidy cover of Rs. 20 billion already provided by Finance Division from August 1, 2022 and Power Division will notify the tariff for first quarter of FY 2022-23.

The Cabinet ratified the decision of the ECC in the case titled "regionally competitive energy rates for export oriented sectors during FY 2022-23 (effective July1, 202 2)" with following stipulations: (i) rate of US cents 9 per kWh for the export oriented sectors will also be applicable till the end of FY 2022- 23 as in case of RLNG; and (ii) rules will be effective from August 1,2022.

However, during the Cabinet's meeting held on July27, 2022 “the Minister for Finance apprised that the ECC had approved regionally competitive energy rates to the export-oriented sector electricity @ US cents per kWh and RLNG @ US $ 9 per MMBtu.

On a query by the Prime Minister as to whether the rates were for the entire financial year, the Minister for Finance apprised that RLNG rates were for the entire financial year, while electricity rate was for two months, as funds to the tune of Rs. 20 billion only were available for subsidy at the moment.

Prime Minister desired that the electricity rate to export oriented industry should also be guaranteed for the whole year to ensure continuity and predictability. The Minister for Finance requested that the decision of ECC may be ratified as suggested, and assured that the electricity rate to export-oriented industry would remain applicable for the whole financial year, for which requisite funds would be arranged either through expenditure cuts or revenue increases.

In pursuance of both decisions, Power Division notified electricity tariff of US cents 9 per kWh all-inclusive initially for August-2022 of August 12, 2022 and then for September-2022 on September 16, 2022.

However, Cabinet Division on August 19, 2022 issued a corrigendum on the summary submitted directly by Finance Division and revised decision of the Cabinet meeting held on August 27, 2022 and deleted the paragraph “the rate of US cents 9 per kWh for the export oriented sectors will also be applicable till the end of FY 2022-23 as in case of RLNG".

Further, Power Division, in its O.M of 26, 2022 requested Ministry of Commerce to arrange and provide additional funds amounting to Rs. 33.4999 billion (Rs. 26.287 billion of pending claims of FY 2021-22 + Rs. 7.212 billion for month of September 2022) and intimate the consumers of export-oriented sectors for discontinuation of concessionary tariff from October 1, 2022.

Subsequently, a meeting was held on October 6, 2022under the chairmanship of Minister for Finance and Revenue and participation from Minister for Commerce, Minister for Energy (Power Division), Coordinator to the Prime Minister on Commerce, Secretary Finance, Secretary Commerce, Secretary Power, Special Secretary Commerce, and representatives of Finance, Commerce and Power Divisions wherein export oriented sectors showed their apprehensions over discontinuity of regionally competitive electricity tariff in contrast to earlier commitments by the Government making them internationally uncompetitive.

After thorough deliberation, Minister for Finance and Revenue announced that electricity will be continued to be provided to five export oriented sectors on regionally competitive tariff of Rs. 19.99 per kwh all-inclusive (instead of US cents) from October1, 2022 to June 30, 2023.

In order to keep export oriented sectors internationally competitive and sustain exports in backdrop of economic slowdown, Commerce Ministry has proposed that: (i) electricity may be provided at Rs. 19.99 per kwh all-inclusive to five export oriented sectors namely textiles including jute, leather, carpet, surgical and sports goods across Pakistan from October1, 2022 to June 30, 2023; and (ii) Finance Division may give financial commitment that additional funds as required by Power Division shall be provided for continuity of concessionary electricity tariff.

Copyright Business Recorder, 2022

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