Concessional power to zero-rated sectors: Qamar wants to have a word with Miftah on ‘secret’ waiver

ISLAMABAD: Commerce Minister Syed Naveed Qamar has sought clarification from Finance Minister Dr Miftah Ismail on “secret” withdrawal of concessional electricity for five zero-rated sectors for last three quarters of current fiscal year, implementation on effectivity date of RLNG rates and ban on registration of new units under concessionary regime.

In a letter to Finance Minister, copies of which have also been sent to Power Minister and Petroleum Minister, the Commerce Minister appreciated the former for his support on continuation of regionally competitive tariff to five export-oriented sectors (namely textiles including jute, leather, carpet, surgical and sports goods) that has helped Pakistan’s industry to achieve historic high exports of goods, ie, S 31.79 billion during FY 2021-22 despite the fallout of Covid-19 pandemic and severe economic challenges.

Recalling the decision the ECC took on July 25, 2022, the Commerce Minister said that the ECC of the Cabinet considered a summary submitted by Ministry of Commerce regarding “regionally competitive energy rates for export oriented sectors during FY 2022-23 (effective July 1, 2022)” and subsequently the Federal Cabinet ratified the ECC’s decision on July 27, 2022.

In pursuance of decisions of the ECC and the Cabinet, the Power Division on August 12, 2022 directed Discos/K-Electric “to provide electricity @ US cents 9 per kWh all-inclusive to five export oriented industries (erstwhile zero-rated Industries, ie, textiles, leather, carpet, surgical and sports goods) from August 2022 with the direction that the Discos (including K-Electric) will be informed for continuation of the concessional tariff scheme on monthly basis.”

Power supply to 5 zero-rated sectors: MoF gets PM’s nod to revisit Cabinet decision

On August 12, 2022, the Petroleum Division directed SNGPL and SSGCL that “RLNG would be provided at US $ 9 per mmbtu all-inclusive to five export-oriented sectors across Pakistan for all existing connections remaining with the allocation of a total subsidy of Rs. 40 billion as already made by Finance Division in the budget. The rates will be effective from August 1, 2022.”

Subsequently, the Cabinet Division on August 19, 2022 issued a corrigendum in pursuance of Prime Minister’s approval on the summary submitted directly by Finance Division and revised decision of the Cabinet meeting held on August 27, 2022 and deleted the following para: (a) 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.

According to Commerce Minister during the ECC and the Cabinet’s meetings, it was decided that: (i) RLNG will be provided@ US$ 9 per mmbtu all-inclusive from July 1, 2022.The decision of August 1, 2022 was only specific to the electricity which is recorded in the minutes as well.

However, Petroleum Division implemented the decision from August 1, 2022 that is contrary to the discussion held in the ECC and the Cabinet; (ii) 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. However, implementation of the decisions by Power and Petroleum Division does not cover applicability of regionally competitive tariffs is till 30th June 2023: and (iii) RLNG will be provided @ US $ 9 per mmbtu all-inclusive to five export-oriented sectors/industries across Pakistan for all existing connections as of the decision’s date.

However, the Petroleum Division has stopped registration process of existing export oriented sectors with the argument that only those five export-oriented sectors will be allowed to avail concessionary tariff who were already registered in accordance with Circular No. 4 of the FBR.

The Commerce Minister maintains that no such point was discussed either in the ECC or in the Cabinet and all existing connections irrespective of their registration status will be allowed to avail the concessionary tariffs.

After explaining the case, the Commerce Minister has requested that the clarifications on the points raised in his letter be issued to Power and Petroleum Division so that five export-oriented sectors across Pakistan may avail regionally competitive tariffs during FY 2022-23 to reduce their cost of manufacturing and boost national exports.

Copyright Business Recorder, 2022