The Power Division has reportedly decided to seek the Economic Coordination Committee's nod on the pact agreed with the export-oriented industry due to expected financial impact of up to Rs 33 billion per annum, well-informed sources told Business Recorder.
The export-oriented industry, sources said, will be exempted from Financial Cost Surcharge, Quarterly Tariff adjustment (QTA), positive fuel adjustment and Neelum-Jhelum Surcharge, in the light of an agreement, but the industry would have to pay other taxes which are in the domain of the Federal Board of Revenue (FBR), the sources added.
"The agreement with the export-oriented industry will be presented before the ECC as it has financial implications. As the ECC accords approval, it will be placed before the Cabinet for ratification," the sources maintained.
The government, sources said, will bear the brunt of Rs 30-33 billion per annum, which implies that the revenue of struggling power sector will further decline, the sources added. On January 22, 2020, All Pakistan Textile Mills Association (Aptma) informed the government that excessive billing by the Power Division against the notified tariff of 7.5 Cents per unit to export oriented industry will have disastrous impact on exports and Balance of Payments (BoP) and trigger a crisis in the textile sector.
One Friday, when Minister for Power, Omar Ayub Khan was asked to share the details of the agreement, he advised BR to see his or Hammad Azhar's tweets.
Omar, in his tweet stated that the agreement reached will be budget neutral for Finance Division. He further stated that it was agreed by all parties that the government will provide maximum Rs 20 billion total subsidy for power and petroleum in the form of cross subsidy and/or allocation, in next year's budget. Hammad Azhar, in his tweet had stated that the government has been providing base power tariff of 7.5 cents to export oriented sectors since January 2019. It will continue to do so till June 2020 and will also absorb add-ons on top of this base tariff (excluding taxes) from January 2019 till June 2020. He further stated that for the next financial year (2020-21), the total sum of subsidy (including cross subsidy and/or allocation) for power and gas sectors that is to be passed onto these sectors shall be capped at Rs 20 billion and the resultant tariffs shall be notified accordingly.
The sources further stated that the textile sector which actually lobbied to restore zero-rating, had also approached Prime Minister Imran Khan for restoration of 7.5 Cents all inclusive, after which movement was witnessed on this front. It is however, unclear how and why the Power Division, which was resisting all moves of textile sector agree but insiders claim that Power Division was forced to accommodate industry.
On January 23, 2020, a spokesperson of Power Division had stated that the additional costs reflected periodic adjustment are not covered by such subsidies and if they are not charged to the "industry", the burden would have to be shared by domestic, agricultural and commercial consumers. It is unclear how this subsidy will be arranged by the Finance Division.
The spokesperson had further stated that at present approximately benefit of Rs. 7.30/kWh is being given in lieu of the peak units and Rs. 1.50/kWh is being given in lieu of off-peak units to all such consumers, strictly in terms of SRO No. 12/(I)/2019. This subsidized regime is continuing and has not been withdrawn.
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