KARACHI, Jan 31: A federal cabinet sub-committee on Energy headed by Prime Minister Shaukat Aziz is holding first meeting on Friday, after almost 18 months of its formation, to review the overall supply and demand position. Industry leaders hold a lot of expectations from this meeting and hope to get a 10 to 12 per cent tariff concession in gas rates as reported to have been recommended by the Oil and Gas Regulatory Authority (Ogra).

“The committee may also take up the proposal of two days off a week as part of energy conservation,” a senior official of one of the ministries represented in the cabinet sub-committee said. According to him the committee is expected to take stock of energy availability and demand position and consider proposals for long and short-term measures.

Industry leaders are desperate for a substantial relief in the energy tariff as according to them the rising financial charges, an unbearable burden of energy and transportation tariff and a significant rise in wages have crippled their business.

“The dwindling export figures virtually across the board speak a lot about the production cost and how uncompetitive Pakistani products are in the international market,” a business leader said.

In their meetings with the government at different levels, the industry leaders have been asking for a review of cost of doing business in Pakistan in context of energy tariff, financial charges, wages and transportation cost.

“The government focuses only on revenue generation and has ignored all other aspects of the business,” complained a leader of a local industry association.

“In a short span of last two years, the financial cost went up by 163 per cent, energy cost by 58 per cent and gross wages by 60 per cent,” Shafqat Elahi, the chairman of All Pakistan Textile Mills Association (Aptma) said.

Responding to a more than 10 per cent fall in exports of textiles in the first quarter of this fiscal, the government offered a concession and incentives package of about Rs22 billion to Rs25 billion to the value-added sector but spinning was ignored.

Under this package, the government continued to give a six per cent cash rebate on export of readymade garments in the current fiscal year and also offered 5 per cent rebate on home textiles and 3 per cent on fabrics.

The value-added sector was also allowed to swap expensive loans with relatively less expensive bank loans under a long-term financing arrangement given to export-oriented units. The rate of export refinance was also brought down to 7 per cent.

“Why was spinning ignored,” complained Shafqat Elahi adding that this sector was most capital intensive that has not been given any incentive or concession in last more than a decade. The federal textile ministry carried out a survey by a foreign consultant that found Pakistan’s spinning sector “most efficient” the Aptma leader claimed.

Late last year, the prime minister constituted a committee to draw up a short and long-term textile strategy. Tariq Sayeed Saigol, a former chairman of Aptma has offered a fresh package of incentives and concessions that seeks reduction in energy cost, exemption from a number of taxes and swapping of expensive loans with relatively less expensive loans.

Shafqat Elahi expects a maximum amount of Rs15 billion will need to be swapped under the proposal as it envisages only that amount of money, which was utilised to import machinery and equipment. Under this arrangement the loans obtained by the textile mills from January 1, 2003 and the loans outstanding in July 2006 are covered.

Initial estimates show that Aptma members have a total outstanding loans of about Rs17 billion. Of this about Rs12 billion covers the imported machinery and equipment.

Loans of about Rs3 billion to Rs4 billion were obtained by non Aptma members. Overall, the estimate is Rs15 billion loans of the spinning sector that would need to be swapped under the proposal.

Leaders of other sectors — leather, sports, cutlery, surgical instruments, carpets etc are also making preparations to seek concessions and incentives as export of textiles have somewhat picked up in November and December but there is no improvement in other categories of items.

Not only that export is sluggish, the domestic market is flooded with all imported consumer items that rendered domestic industry uncompetitive. The government’s focus remains on the services sector — finance, insurance, capital market, wholesale and retail trade, construction etc, complain industry leaders as the real sectors — industry and agriculture — are ignored.