ISLAMABAD: Prime Minister Shehbaz Sharif has directed concerned ministries to convene meetings of relevant stakeholders for consultation on revision of seed-cotton support price, finalization of mechanism for application of Weighted Average Cost of Gas (WACOG) and processing of applications for Extension of Load (EoL) and new connections of electricity.
Prime Minister's Office (PMO) issued these directions to Ministry of National Food Security and Research, Petroleum Division, Power Division and Ministry of Commerce, in response to a letter written by All Pakistan Textile Mills Association (APTMA).
PMO has also advised APTMA to approach National Tariff Commission (NTC) with regard to their grievances against anti-dumping duty on polyester staple fibre, under prevalent rules/ policy.
PMO has also directed that consultation be undertaken with relevant stakeholders to examine the proposals of Power Division on disbursement of subsidy to export oriented sectors.
APTMA, in its letter to the Prime Minister, shared proposals for sustaining and accelerating textile exports.
On APTMA proposal regarding announcement of a cotton support price of Rs. 8000 per maund of Phutti for the upcoming season, Ministry of National Food Security and Research stated that the Intervention Price Policy 2021-22 though approved late (August) in the season resulted in better crop management by growers and improved production despite a decline in area under cultivation compared to last year.
In lieu of this result the government has approved the intervention price policy before the start of sowing season (March) to influence growers’ decision with respect to cotton planting.
Ministry argues that the intervention price already approved is being revised with the consent of the Government to lure more farmers towards cotton cultivation.
Value-added textile sector resents policy rate hike
On APTMA’s proposal regarding announcement of cotton support price of Rs 8,000 per maund of Phutti for the upcoming season, Commerce Ministry commented that in order to revive cotton production, Ministry of National Food Security and Research (MNFSR) has submitted a summary to ECC of the Cabinet and proposed ”to set threshold intervention price of seed-cotton at Rs. 5,700/ 40 kg, trigger the intervention price of seed-cotton at 10 per cent discount of the estimated import parity price using the Cotlook A-Index when domestic prices drop below this threshold and provide a cash credit limit to Trading Corporation of Pakistan (TCP) to procure two million bales at intervention price”. The ECC of the Cabinet approved the summary submitted by the MNFSR on March 17, 2022 and the decision was ratified by the Cabinet on March 17, 2022.
To revive the domestic cotton production, MoC supported the MNFSR’s proposal to set intervention price; however, MoC maintained that a better option for encouraging cotton crop sowing and enhancing the yield would be to provide high quality seed and direct subsidy mechanism to the farmers or fertilizer and pesticide instead of procurement from ginning industry by the TCP.
Commerce Ministry has not supported APTMA’s proposal to set intervention price at Rs. 8,000 per maund as it neither has any correlation with cost of production calculated by the API (MNISR) nor has any rationale.
Commenting on APTMA’s proposal that duty on PSF may be reviewed and anti-dumping duties removed to enable Pakistani export products to compete internationally, Commerce Ministry has stated that the custom duty and anti-dumping tariffs on PSF are subject to domestic protection and international regulatory framework.
The NTC is an autonomous investigation authority of the GoP on trade and tariff matters including domestic protection and anti-dumping. APTMA may be advised to submit its application/ reference with supporting evidence to the NTC for investigation as per prescribed rules/ regulations and procedures.
MoC maintained that as per Textile and Apparel Policy, 2020-25 approved by the ECC on February 9, 2022, energy (electricity and RLNG) will be provided to the export-oriented sectors of textiles and apparel industry at regionally competitive rates throughout the policy years.
For FY 2020-21, electricity is being provided at Cents 9 per unit and RLNG at $ 6.5 per MMBTU at par with the regional competitors. For next policy years, regionally competitive energy tariff will be offered to export-oriented sectors as per strategic intervention approved under the Section 2.2.2 of Textiles and Apparel Policy 2020-25.
On new connections Power Division, has stated that M/s APTMA may provide a list of pending cases of new connections.
Commenting on regionally competitive electricity tariff of 7.5 cents/ kWh across the entire value chain Power Division has argued that instead of providing electricity at a concessional rate to the export-oriented sectors, subsidy to export-oriented sectors should be disbursed, based on the export receipts as verified by the FBR, instead of linking it with the zero-rated status.
Accordingly, the zero rated industrial consumers may be billed at GoP notified rate and subsidy shall be managed by Ministry of Commerce/ Textile Industry based on the following principles: (i) Ministry of Commerce/ Textile Industry may define the subsidy rate based on analysis of actual electricity expense per export receipt in dollars at HS codes level, for all categories of zero-rated exports;(ii) subsidy rules against HS codes may be updated in WEBOC system; (iii) on receipt of export proceeds, subsidy claim of exporters may be processed based on WEBOC calculations on the same pattern of Duty Drawback Scheme (DDT/DLTL).
On the issue of priority of Gas/ RLNG, Petroleum Division has stated that there was no major change in the priority order in winters except that the fertilizer sector was brought to second place, at par with power sector for Rabi season considering the food security concerns of the country. Further, on the recommendation of Ministry of Commerce, a list of top 50 export units were supplied uninterrupted gas, considering their importance as an export substitute.
No change in priority has been made to prioritize non-export sector over zero rated industry. New connections and load enhancement on RLNG is allowed. However, in order to promote efficient use of a natural resource, supply of gas to captive power has been banned and only gas supply for co-generation is allowed. Petroleum Division is willing to supply RLNG at concessional tariff of US$ 6.5/ MMBTU subject to provision of subsidy by Finance Division.
In order to implement WACOG, OGRA Ordinance has been amended. Presently, Petroleum Division is considering multiple options to devise pragmatic application of WACOG. On finalization of this matter necessary advice and instructions will be issued to OGRA and Sui Companies.
Copyright Business Recorder, 2022
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