Subsidy to export sectors: ECC sets up inter-ministerial body to evaluate eligibility

The Economic Coordination Committee (ECC) of the Cabinet has constituted an inter-ministerial committee to evaluate the eligibility of export-oriented sectors for consideration of subsidy, well-informed sources told Business Recorder.
The ECC headed by Prime Minister's Advisor on Finance and Revenue, Dr. Abdul Hafeez Shaikh took the decision while approving tariff of 7.5 cents per unit for export-oriented sectors across the country including KE till June 30, 2020. However, the notification of 7.5 cents per unit is yet to be issued by the Power Division.
According to the ECC decision, the five exports sectors would be provided electricity at an all-inclusive rate of 7.5 cents per unit (kWh) from January 1, 2019 to June 30, 2020; other taxes/charges (including surcharges, quarterly adjustment and fuel price adjustment) on electricity bills issued from January 2019 till date would be adjusted on the rate above 7.5 cents per unit (kWh) from January 1, 2019.
The Finance Division will budget Rs 28 billion as an additional subsidy to the Power Division in the next fiscal year 2020-21. The total volume of subsidy package from January 2019 to June 2020 would be around Rs 28 billion as per following breakdown:
Adjustment from January 2019 to June 2019 on account of the FPA, the Neelum-Jhelum surcharge, O&M cost, fixed charges, etc - Rs 5 billion, tariff from July 2019 to June 2020 on account of quarterly adjustment plus tariff differential subsidy plus FPA, fixed charges, etc - Rs 23 billion per year. This relief package would yield an increase in circular debt by an amount of Rs 28 billion by the end of June 2020 subject to actual on the current set targets.
However, given the cautioned litigation and position of the five export sectors, the commitment to them was a fixed all-inclusive US cents of 7.5 per unit (kWh) plus taxes, the following recommendations are submitted for consideration of the ECC of the Cabinet.
The five export sectors would be provided electricity at an all-inclusive rate of US cents of 7.5 per unit (kWh) from 01.01.2019 to 30.06.2020 plus applicable taxes. Electricity bills issued from January 2019 till date, which included surcharges, quarterly adjustments, fuel price adjustments, FCC, and NJS will be adjusted to a fixed tariff of US cents of 7.5 per unit (kWh). Taxes of the period will be paid by the consumers in addition. The Finance Division will budget Rs 28 billion as subsidy for fiscal year 2019-20 to be paid to the Power Division in the first week of July 2020 out of the budget of fiscal year 2020-21. For continuation of relief package in the next fiscal year 2020-21, additional subsidy will be capped at Rs 20 billion, making a total of Rs 48 billion in the budget of fiscal year 2020-21 for both gas and power sectors.
The ECC constituted a committee under the chairmanship of Minister for Power comprising Minister for Economic Affairs, Hammad Azhar, Advisor to the Prime Minister on Commerce, Industries and Production and Investment, Abdul Razak Dawood, Special Assistant to the Prime Minister on Petroleum, Nadeem Babar, Secretary Finance, Secretary Power and Chairman FBR to evaluate a viable mechanism for provision of targeted subsidy to zero rated industrial consumers and analyse impact of tariff of US cents of 7.5 per unit(kWh) for the export-oriented industry consumers on the export of the country.
The committee will also look into other sectors involved in exports which are eligible for consideration of subsidy. The committee will submit its report to the ECC for consideration within three weeks.