Subsidy availed under ZRI scheme: Finance Division proposes industries’ forensic audit
ISLAMABAD: The Finance Division has proposed forensic audit of industries which availed subsidy under Zero Rated Industries (ZRI) scheme and reconciled data be shared with the Commerce Ministry and the Federal Board of Revenue (FBR), well-informed sources told Business Recorder.
A couple of months ago the government withdrew concessional electricity and gas tariffs of five zero-rated industries on the demand of the International Monetary Fund (IMF). However, All Pakistan Textile Mills Association (Aptma) is using all its contacts within the government to get some relief in electricity tariff.
Meanwhile, the stakeholders have also approached the court against the government’s notification issued by the Power Division.
Power Division shared the petition with Finance Division, which in its comments stated that since it is not a part in the petition accordingly, its views/ comments are not required in the case.
Finance Division, has, however, advised Power Division to intimate to the High Court that the government had decided to provide subsidized electricity to export industries to reduce their costs enabling them to increase their exports by being more competitive. The subsidy support continued since January, 2019 for about four years. During the period, the export industries availed subsidy on electricity at different rates against actual rates.
The government extended subsidy of Rs 5.4885 per unit inn 2018-19, Rs 4.1525 per unit in 2019-20, Rs 5.1063 per unit in 2020-21, Rs 6.5515 per unit in 2021-22 and Rs 7.44 per unit in 2022-23. According to the Finance Division, the government, therefore, provided an overall support of Rs 181 billion to zero rated industry.
However, now it is impossible to continue their subsidized electricity as the government does not have the financial resources to do so.
Finance Division further stated that devaluation of Pakistani Rupee has provided a huge advantage to export industries, as their export earnings translate into much higher PKR returns. According to estimates the export oriented units have been compensated with more than Rs 1.5 trillion due to exchange rate devaluation during the last three years i.e. 2020 to 2023.
According to these estimates the exchange rate gain to export units is much larger than increase in electricity rates.
Further, Power Division may also request the court to issue necessary order for forensic audit of industries which availed subsidy and to reconcile the data with Commerce Division and the FBR on year-wise export (direct and indirect) and local sales data. This is to outline the benefit of ZRI subsidy on export growth and its impact on the balance of payments.
Meanwhile, Patron-in-Chief, Aptma, Dr. Gohar Ejaz, in a letter to Minister of State for Petroleum and Natural Resources, stated that withdrawal of the Regional Competitive Energy Tariff (RCET) of $ 9/mmbtu has raised concerns among stakeholders about the impact of energy cost and the economy/exports. Gohar further stated that based on the approved summary by the ECC, a decision was made that 50 per cent of the demand would be met through domestic gas and the remaining 50 per cent would be met through imported RLNG.
Now, with the withdrawal of the RCET of $ 9/mmbtu, Aptma’s understanding is that the 50/50 arrangement remains intact for nine months of the year (summer) and during the remaining three months (winter) industry will be provided with 100 per cent RLNG and charged at the full price notified by the Ogra.
The Aptma has requested Petroleum Minister to consider the potential impact of the withdrawal of a competitive tariff of $ 9/mmbtu for gas/RLNG on the economy as a whole and take appropriate measures to mitigate any negative consequences.
Copyright Business Recorder, 2023
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