Surcharges, taxes: Textile sector urges Power Division to withdraw SRO

The country's textile sector has urged the Power Division to withdraw its SRO regarding imposition of surcharges, taxes and positive fuel adjustment on export-oriented sectors as it will have a disastrous impact on exports and the balance of payments as it would precipitate a crisis in the textile sector.

This warning has been issued by All Pakistan Textile Mills Association (APTMA) in a letter to the Minister for Power Division, Omar Ayub, Prime Minister's Advisor on Commerce, Special Assistant to the Prime Minister on Petroleum, Secretary to Prime Minister and Secretary Power, saying that exports will be massively negatively hit by the recently issue SRO by the Power Division.

APTMA referred to SRO of January 1, 2019 wherein the Ministry had fixed an all inclusive tariff/payment of 7.5 cents/kWh for supply of electricity to the export oriented industry. The notification was made under subsection (7) of section 31 of the Regulation of Generation, Transmission and Distribution of Electric Power Act, 1997(XL of 1997). Further clarifications as issued by the Ministry in February indicated that rate would be inclusive of all charges.

The 8 February 2019 SRO states: "in order to further rationalize the payments for zero industrial consumers, Discos and K-Electric are to receive from such zero rated industrial consumer as per above, it is hereby notified that payment from such zero rated industrial consumers shall be reduced up to the rate of 7.5 cents/KWh (inclusive of above mentioned special relief package). For billing purpose of zero rated industrial consumers the dollar exchange rate will be considered as the National Bank-end dollar sale rate, on the last working day of preceding month. The difference between the relevant payment due from such zero rated industrial consumer per above mentioned SROs and special relief package for such zero rated industrial consumer, shall be paid to Discos and K-Electric by federal government per the notification for rationalization for process of payment of subsidy."

The 13 January 2020 SRO notes that "As zero rating was withdrawn by the Government in July 2019, continuation of policies and facilities to the former zero rated companies was guaranteed by the government through a clarification issued by the Ministry of Commerce defining the former zero rated sectors as export oriented sector on December 13, 2019," said APTMA.

However, in contradiction of SRO and the clarifications the Ministry of Energy in its letter of January 13, 2020 has conveyed to the Discos to bill all additional charges such as financial cost charges, Neelum Jhelum surcharge, taxes, fixed charges, Quarterly Tariff Adjustment (QTA) and Fuel Price Adjustment (FPA) in addition to 7.5 cents.

Power Division issued repeated clarifications for the all-inclusive nature of the 7.5 cents/kWh tariff, the imposition of additional charges is contrary to law and the clarifications of the government. SRO of January 1, 2019 can only be changed by a further notification under the law through which it was first notified. The SRO states "The notification unless amended or withdrawn earlier by the federal government shall continue to remain in field till notification of new tariff for Discos and K-Electric."

According to textile sector, bills of Islamabad Electric Supply Company (Iesco) for the period of December 16, 2019 to January 2020 have now been received, which do not reduce the amount payable to 7.5 cents per unit in accordance with the SRO and the law and include all surcharges specially excluded by the Ministry's clarifications.

"We strongly protest of the unreasonable manner in which the Ministry of Energy has changed its interpretation of a very clearly worded SRO and earlier clarifications," said Executive Director APTMA, Shahid Sattar.

Textile sector argues that the unwarranted action will have disastrous impact on exports and the balance of payments as it would precipitate a crisis in the textile sector in Pakistan which is delivering on its commitment to enhance exports.

The textile sector is already investing in new plants and upgradation as its order books are full and need for expansion and modernization is being actually felt. However, these orders and exports are based on costing of regionally competitive tariff of 7.5 cents/kWh.

"Under these circumstances withdrawing the commitment of regionally competitive energy of 7.5 cents/kWh all inclusive would nullify all the excellent work done by the government over the last 18 months which has resulted in substantial quantitative increase in exports," Sattar said, demanding of the Power Division to review the matter objectively and withdraw the letter of January 13, 2020.