Export-oriented sectors: Govt has agreed to supply energy without disparity

ISLAMABAD: The federal government has reportedly agreed to supply electricity at 9 cents per kWh and RLNG at $9 per MMBTU without disparity and all inclusive to five export-oriented sectors across the country for one year (till June 30, 2023), subject to shifting of Punjab-based industry using indigenous gas-based captive power plants to the national grid, sources close to Commerce Secretary told Business Recorder.

Sharing details, sources said that in pursuance of decisions of the Economic Coordination Committee (ECC) of the Cabinet on August 16, 2021 and its ratification by the federal cabinet on August 24, 2021, the government provided energy to export-oriented sectors (erstwhile zero-rated sectors) namely textiles including jute, leather, carpet, surgical and sports goods at regionally competitive rates, i.e., electricity at 9 cents per kWh all-inclusive and RLNG at $6.5 per MMBTU during FY 2021-22 to reduce cost of manufacturing and enhance exports.

Furthermore, the committees constituted by the ECC comprising the representatives of Finance, Commerce, Power and Petroleum Divisions held several meetings to deliberate on the matter and recommended a few changes to be incorporated in Textiles and Apparel Policy.

Subsequently, the Cabinet approved implementation report of the Committee and revised Textiles and Apparel Policy submitted by Commerce Division.

In accordance with approved policy interventions, energy (electricity and RLNG) will be provided to export-oriented sectors at regionally competitive rates throughout the policy years.

Ministry of Commerce noted that it is responsible for exports and approximately 65% of total exports are from five export-oriented sectors including textiles.

Further, such measures including others provided a launching pad for export-oriented sectors and resultantly overall exports achieved historical high level of $31.79 billion last fiscal year with an increase of 25.64% as compared to FY 2020-21.

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

According to Commerce Ministry, realizing the importance of continuation of concessionary rates to sustain exports, several meetings were held under the chairmanship of Federal Minister for Finance and Revenue with federal ministers for Power and Petroleum, relevant ministries and industry representatives wherein Commerce Ministry reiterated its position of continuation of concessionary energy tariffs at par with the regional competitors to maintain momentum of exports.

Whereas, Ministry of Energy (Power and Petroleum Divisions) requested Finance Division that the budgetary allocation may accordingly be made in case concessionary energy tariffs have to be continued during FY 2022-23.

After thorough deliberations and while considering prevailing financial challenges, it was agreed that: (i) RLNG tariff may be revised from $6.5 to $ 9 per MMBTU all-inclusive for export oriented sectors ;(ii) for indigenous gas, being provided to other provinces, prices may be revised to $7 per MMBTU for export oriented sectors and ;(iii) as there is a restriction on new industrial gas connections due to shortage of natural gas, RLNG may be provided to SSGCL consumers on same concessionary tariff as that of SNGPL consumers of five export-oriented sectors.

Commerce Ministry has claimed that Rs20 billion for electricity and Rs40 billion for RLNG have been allocated under Federal Budget 2022-23 to supply energy at concessionary tariff to five export oriented sectors.

Subsequently, a meeting under chairmanship of Prime Minister Shehbaz Sharif was held on July 7, 2022 with the Ministers for Finance, Commerce, Power, Petroleum and representatives of Finance, Commerce, Power and Petroleum Divisions and textile industry on prevailing issues of tariffs and availability of gas/RLNG and power.

Keeping in consideration the proposals of textile industry and budgetary space available, it was agreed that electricity at 9 cents per kWh and RLNG at $9 per MMBTU all-inclusive will be provided to export-oriented sectors.

However, only 50 MMCFD will be supplied to captive power plants of export oriented sectors on SNGPL network, till the time supply related issues get settled.

Further, textile industry has shown willingness that its captive power plants in Punjab using indigenous gas primarily for power generation may be shifted to national grid but uninterrupted supply and reliability of grid electricity would be ensured and also issues of new connections, load enhancement and transmission/ distribution would be sorted out immediately.

Based on decisions taken at a meeting presided over by the Prime Minister, Commerce Ministry has prepared following proposals for the ECC aimed at providing energy at regionally competitive rates: (i) electricity may be provided at 9 cens per kWh all-inclusive to export oriented sectors namely textiles including jute, leather, carpet, surgical and sports goods from July 15, 2022 to June 30, 2023 ;(ii) RLNG may be provided at $9 per MMBTU all-inclusive to five export-oriented sectors from July 1, 2022 to June 30, 2023 across Pakistan without any disparity; (iii) RLNG may be provided to SSGC consumers on same concessionary tariff as that of SNGPL consumers of five export oriented sectors; and (iv) Finance Division may give financial commitment that additional funds if required by Power and Petroleum Divisions shall be provided to continue supply of energy to export oriented sectors on concessionary tariff .

Commerce Ministry has further urged the Ministry of Energy (Power and Petroleum Divisions) to apprise Finance Division about the budgetary situation in time and place a summary for supplementary grant allocation before the ECC for consideration.

Copyright Business Recorder, 2022