Concessional power to zero-rated industry: MoC seeks FD’s support to its Rs26bn SG summary

ISLAMABAD: Commerce Ministry has requested Finance Division to support its summary on supplementary grant allocation of Rs 26 billion for continuation of concessionary rates of electricity to export-oriented sectors during FY 2021-22.

Well informed sources told Business Recorder that Commerce Ministry, which has not received an encouraging response on its proposal from Power Division and Finance Division, has restated its stance saying that after extensive deliberations with Finance, Power and Petroleum Divisions, policy interventions on energy were finalized and incorporated in revised Textiles and Apparel Policy, 2020-25 and subsequently approved by the ECC and ratified by the Cabinet.

According to Commerce Ministry, para-2.2.2 of the Policy states: “energy (electricity and RLNG) will be provided to the export-oriented units’ sectors of textiles and apparel industry at regionally competitive rates throughout the policy years. An exercise will be conducted by Ministry of Commerce jointly with the Ministry of Energy (Power and Petroleum Divisions) and the Finance Division during pre-budget consultative sessions annually to review the energy tariffs. The rates may be revised on an average of energy prices for industrial consumers of regional competitors and announced in Federal Budget along-with budgetary allocations by Finance Division as actually required by Ministry of Energy so that energy subsidy would remain fully funded throughout the policy years.”

Commerce Ministry, in its latest communication with Finance Division has stated that the latter allocated supplementary grants of Rs.71 billion to Petroleum Division during CFY 2021-22 to continue supply of RLNG to five export oriented sectors in addition to budgetary allocation of Rs. 10 billion, in pursuance of the summary approved by ECC which is as follows:

Power supply to export-oriented sectors till 30th: Finance Ministry puts MoC on the defensive

“The Finance Division may give financial commitment that additional funds if required by Power Division and Petroleum Division shall be provided to continue concessional energy rates to export oriented sectors. However, Ministry of Energy may apprise relevant ministries regarding the budgetary situation in time so that Commerce Division may place a summary for supplementary grant allocation before ECC of the Cabinet for consideration.”

Owing to severe financial constraints, Power Division has conveyed that it will not be in position to sustain subsidy implications and continuation of concessionary tariff beyond 31 May 2022, as budgetary allocation of Rs. 26 billion under FY 202 1-22 has already been exhausted. Therefore, it is essential to allocate supplementary grant to Power Division for continuation of concessional electricity tariff to export-oriented sectors till June 30, 2022 in accordance with the ECC’s decision.

Commerce Ministry, in its communication has requested Finance Division to offer its concurrence on the draft summary titled “supplementary grant allocation for continuation of concessionary rates of electricity to export-oriented sectors during CFY 2021-22” and the matter may be treated on priority as the summary to be placed before ECC of the Cabinet is currently on hold.

Copyright Business Recorder, 2022