Concessional energy to export-oriented sector: ECC approves amendments to earlier decision

ISLAMABAD: The Economic Coordination Committee (ECC) of the Cabinet has approved amendments in Cabinet’s earlier decision regarding provision of electricity and RLNG at concessional rates for five export-oriented sectors.

Ministry of Commerce gave a background for information of the forum that earlier the ECC of the Cabinet had considered the Ministry’s summary titled “regionally competitive energy rates for export-oriented sectors during FY 2022-23 (effective from July 1, 20221” and subsequently the Federal Cabinet had ratified the ECC’s decision on July 27, 2022.

It was further stated that Cabinet Division on August 4, 2022 issued minutes and decisions of the Cabinet meeting which was held on July 27, 2022.

The minutes recorded were as follows: “The Minister for Finance apprised that the ECC had approved regionally competitive energy rates to the export-oriented sector: electricity @ US cents 6.5per kWh and RLNG @ $ 9 per Mmbtu.

On a query by the Prime Minister as to whether the rates were for the entire financial year, the then Minister for Finance apprised that RLNG rates were for the entire financial year, while electricity rate was for two months, as funds to the tune of Rs. 20 billion only were available for subsidy at the moment.

The Prime Minister desired that the electricity rate to export-oriented industry should also be guaranteed for the whole year to ensure continuity and predictability. The Minister for Finance requested that the decision of ECC may be ratified as suggested, and assured that the electricity rate to export-oriented industry would remain applicable for the whole financial year, for which requisite funds would be arranged either through expenditure cuts or revenue increases.

Five export-oriented sectors: ECC decides to increase RLNG rate to $9 per MMBTU

The issue of the date of applicability of electricity rate for the export-oriented industry was also debated as some of the members felt that it should be from July 1, 2022, instead of August 1, 2022, to ensure continuity.

However, on the recommendation of Minister for Finance, the Cabinet agreed that the rate would be applicable from August 1, 2022, as approved by the ECC.

The Ministry of Commerce argued that the decision as issued by Cabinet Division, did not reflect the minutes of the Cabinet’s meeting and erroneously recorded that “the rates will be effective from August 1, 2022” instead of specifying the applicability of rates in case of electricity only.

Petroleum Division implemented the decision for RLNG effective from August 1, 2022, same as that of electricity. Further, Petroleum Division stopped grant of concessionary RLNG tariff to those existing connections of export-oriented sectors being registered with FBR after June 30, 2022.

It was stated that no such point was discussed either in the ECC or in the Cabinet and all existing connections irrespective of their registration status were eligible to avail concessionary RLNG tariff, as of the ECC decision’s date.

Ministry of Commerce submitted following proposals for consideration and approval of the ECC: (i) earlier decision of the Cabinet of July 27, 2022 may be amended as: “the electricity tariff will be effective from August 1, 2022, whereas RLNG tariff will be effective from July 1, 2022; and (ii) Petroleum Division may allow concessionary RLNG tariff of $ 9 per MMBTU all-inclusive to all existing connections of five export-oriented sectors across Pakistan (registered with FBR before and after 30th June 20221 during FY 2022-23).

After a brief discussion, the ECC, in its meeting held on October 27, 2022 approved amendments in earlier decision of Cabinet.

Copyright Business Recorder, 2022