Export sector to enjoy subsidised tariff for another year

Published August 17, 2021
For almost three years now, the government has been extending a mix of local gas and RLNG to export-oriented industry throughout the country. — AFP/File
For almost three years now, the government has been extending a mix of local gas and RLNG to export-oriented industry throughout the country. — AFP/File

ISLAMABAD: The Eco­nomic Coordination Com­mit­tee (ECC) of the cabinet on Monday extended subsidised flat electricity and gas rates to the export sector for another year and cheaper power rates to all industrial consumers for the next six months on incremental consumption.

The ECC meeting presided over by Finance Minister Shaukat Tarin, however, constituted a subcommittee to rationalise use of energy inputs and ensure that export industries do not misuse cheaper gas for internal power generation and further sale. It deferred a summary seeking recovery of about Rs50bn general sales tax and other fixed tariff from agriculture tubewell consumers.

While requesting the continuation of concessional rates of electricity and re-gasified liquefied natural gas (RLNG) to export-oriented sectors, the commerce ministry said the extension of subsidised flat rates was important for sustained increase in exports by providing energy at regionally competitive rates.

For almost three years now, the government has been extending a mix of local gas and RLNG to export-oriented industry throughout the country at a fixed rate of $6.5 per unit (Million British Thermal Unit-MMBTU) and electricity initially at fixed rate of 7.5 cents per unit (Kilowatt hour-kWh) which was later increased to 9 cents per unit.

The meeting was told that exports had increased by 14pc during the fiscal year 2020-21 despite global economic challenges but could post even higher growth as significant increase in investment and imports of machinery and equipment for capacity expansion had been seen over the past months.

This meant the factories were now geared to higher production and greater exports for which government support should at least continue during the current year.

“After due deliberations, the committee approved the continuation of electricity and gas subsidy for export-oriented sectors to support the momentum of growth in exports during the FY2021-22,” said an official statement.

The finance minister, however, emphasised the need to incentivise export-oriented sectors to take exports to the next level but at the same time wanted to rationalise usage of energy inputs.

Therefore, a subcommittee was constituted comprising ministers for energy and industries, adviser on commerce, deputy chairman planning commission, additional secretary corporate finance and other relevant officials to work out a plan to resolve the issue of continued use of gas by some units for power generation and non-cooperation in audit of such use.

The subcommittee was directed to present its recommendations before ECC within 30 days for further deliberation.

The ECC also approved extension of incremental consumption package for industrial consumers of ex-Wapda distribution companies (Discos) and K-Electric until Dec 31, 2021.

Under the package application of incremental consumption package for BI (Non ToU) consumers at the rate of Rs12.96 per kWh would continue from July 1 to Dec 31, 2021.

Published in Dawn, August 17th, 2021

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