Export-oriented sectors: Govt backs out of subsidised power decision

ISLAMABAD: In a major U-turn, the Federal Government has reportedly backed out from its decision to supply electricity to five export-oriented sectors (erstwhile zero rated sectors) at cents 9 per unit for the entire current fiscal year (CFY 2022-23) after a summary approved by the Prime Minister was sent by the Finance Division in “violation” of rules of business 1974, well informed sources in Commerce Ministry told Business Recorder.

Insiders claim that the decision has been taken to meet the conditions of International Monetary Fund (IMF) as the Fund has not supported additional funding for export-oriented industry.

Cabinet’s Division Deputy Secretary, Muhammad Ashfaq, in a letter to Secretary Finance, Secretary Commerce, Secretary Power Division and Additional Secretary Cabinet stated that Finance Division sent a summary titled “regionally competitive energy rates for export oriented sectors during FY 2022-23 (effective from July 1, 2022)” to the Prime Minster for amendment in the approved minutes/ decision of the Cabinet for approval of Prime Minister, whereby, a corrigendum was sought.

Cabinet Division, in its letter apprised that as per standard procedure, in case of an amendment/ correction/ revision by a Division a written request is required to be made to the Cabinet Division and subsequently the latter thereafter sends a summary to the Prime Minister for approval with its views in terms of rule 8 and 20(14) of the Rules of Business, 1973.

According to the Cabinet Division, in this case, the views of Commerce Division and Power Division were also required, adding that the direct submission of summary to Prime Minister by Finance Division is in violation of rules/ SoPs and prescribed procedures.

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

The Cabinet Division has issued the altered decision, saying that although decision is being issued keeping the urgency and Prime Minister’s approval in mind, yet the Finance Division should adhere to the laid down rules and procedures.

The Cabinet ratified the decision of the ECC in the case titled “regionally competitive energy rates for export oriented sectors during FY 2022-23 (effective July 1, 2022)” with following stipulations: (i) the rate of US cents 9 per kwh for the export-oriented industry will also be applicable till the end of FY 2022-23 as in the case of RLNG; (ii) the rates will be effective from August 1, 2022; and (iii) the recommendation of ECC to raise existing indigenous gas tariff across Pakistan to Rs. 1350/ Mmbtu for export-oriented and general industry was not approved.

The revision decision issued by the Cabinet Division approved by the Prime Minister on a summary of Finance Division on August 19, 2022 states that the decision to charge US cents 9 per kwh for the export-oriented industry will also be applicable till the end of FY 2022-23 as in the case of RLNG has been deleted.

However, other decisions like affectivity date of applicable rates and rejection of upward revision in indigenous gas tariff will remain the same.

Insiders claims that Finance Minister Dr. Miftah Ismail on July 27, 2022 bowed down before the pressure of Prime Minister for continuation of electricity tariff of Cents 9 per unit for zero rated sectors for the entire fiscal year but made it clear that financial implication of this decision would be over Rs 80 billion.

Finance Division in its comments stated that in case of any additional funding requirements, the matter will have to be discussed with the IMF, in consultation with Ministry of Energy, as and when required.

It was also emphasized that the agreement with IMF hardly provided any additional space for subsequent incremental support; therefore, with a view to stay within budgetary allocation, Ministry of Energy must keep an eye on the required amount of subsidy implications vis-à-vis the budgeted amount on monthly basis and to make recommendations for re-adjustment of the subsidized rates on quarterly basis accordingly.

Copyright Business Recorder, 2022