Export-oriented sectors to get power at an all-inclusive rate of Rs19.99 per unit

ISLAMABAD: The country’s influential five zero-rated sectors, referred to as export-oriented sectors will be charged Rs 19.99 per unit electricity all-inclusive whereas domestic consumers are being charged over Rs 40 per unit.

Interaction with power sector experts and officials revealed that the government had budgeted Rs 20 billion subsidy to provide concessional electricity to five zero-rated sectors including textile, carpets, sports, surgical and leather during FY 2022-23. However, of Rs 20 billion, Rs 12 billion were spent in two months (July and August) of financial year 2022-23, after which Power Division decided to stop supply of concessional electricity from October 2022.

Analysts argue that on the one hand the government is gradually withdrawing subsidy from domestic consumers including poor segments and on the other enhancing subsidy to powerful sectors despite strong opposition by the IMF.

The government allocated Rs 285 billion as subsidy for domestic consumers of Discos and K-Electric for the FY 2022-23.

The powerful zero-rated sectors put pressure on the government to continue provision of electricity and RLNG at concessional rates. Ishaq Dar soon after being sworn in as finance minister agreed to provide electricity at Rs 19.99 per unit till June 30, 2023 at Rs 110.757 billion additional cost to the taxpayers.

Insiders claim that since there is no fiscal space available to give additional subsidy to five zero-rated sectors, the Economic Coordination Committee (ECC) of the Cabinet has directed Power Division to bring a summary to the ECC for approval. Power Division has requested to approve technical supplementary or supplementary grant of Rs 143. 826 billion for FY 2022-23 (Rs 110 billion + previous dues of Rs 33.826 billion) to provide uninterrupted supply of electricity to five zero rated sectors throughout the fiscal year.

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

The sources said both Ministry of Commerce and Ministry of Industries and Production had supported the proposal of Power Division whereas Finance Division has yet to identify the source of the required funds.

The sources said power Distribution Companies (Discos) had provided subsidy amounting to Rs 103.319 billion to the export-oriented sectors from January 1, 2019 to June 2022. Finance Division, however, has provided only Rs 77.25 billion so far with Rs 26.069 billion outstanding.

According to sources, it is projected that concessional tariff of Rs 19.99/kWh all-inclusive to the export-oriented sectors from October 2022 to June 2023, would require an additional amount of Rs 110.757 billion.

The sources maintained that an amount of Rs 26.069 billion is still outstanding against supply of electricity at cents 6.5/kWh as Finance Division released only Rs 77.25 billion against claims of Rs 103.319 billion from January 1, 2019 to June 2022.

Another amount of Rs 7 billion is also outstanding from the period August 1, 2022 to September 30, 2022 as Finance Division released Rs 20 billion against claims of Rs 27 billion. The estimated required funds from October 1, 2022 to June 30, 2023 are Rs 110. 757 billion, which implies that Finance Division must arrange Rs 143.826 billion to ensure supply of electricity to five zero-rated sectors as agreed.

Copyright Business Recorder, 2022