Export Sector will benefit from Reduced Tariffs for Another year
On Monday, the cabinet’s Economic Coordination Committee (ECC) extended financed flat electricity and gas rates to the export sector for another year. It also allowed cheaper rates to industrial consumers for the following six months.
However, Finance Minister Shaukat Tarin held a meeting to constitute a subcommittee. He wants to ensure the rational use of energy inputs and eliminate negligence on export industries. The industries might exploit inexpensive gas for internal power generation and further sale.
It postponed a summary request for PKR 50 billion in general sales tax and a fixed tariff from agriculture tube well consumers.
The commerce ministry said that the extension of subsidized flat rates was necessary. It would contribute to sustained increases in exports by providing energy at regionally competitive rates. In addition, they requested concessional rates for electricity and re-gasified liquefied natural gas (RLNG) to export-oriented sectors.
For nearly three years, the government has been providing a mix of local gas and RLNG to export-oriented industry across the country at a fixed rate of $6.5 per unit (Million British Thermal Unit-MMBTU), as well as electricity at a fixed rate of 7.5 cents per unit (Kilowatt hour-kWh). Subsequently, it was increased to 9 cents per unit.
Despite global economic issues, exports climbed by 14% in the fiscal year 2020-21. However, it could expand even faster due to a considerable rise in investment and imports of machinery and equipment for capacity expansion.
Indeed the factories were now geared for higher production and exports. Therefore, the government should continue to provide support for it for the rest of the year.
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The committee authorized the continuation of electricity and gas subsidies for export-oriented sectors. It is done to support the growth in exports during the FY 2021-22.
However, the finance minister stressed the need to incentivize the export-oriented sectors. He wants to rationalize the use of energy inputs.
Therefore, a subcommittee comprised of the ministers of energy and industries, the adviser on commerce, the deputy chairman of the Planning Commission, the additional secretary of corporate finance, and other relevant officials was formed. They came together to devise a strategy to address some units continuing to use gas for power generation while refusing to cooperate in an audit of such use.
The subcommittee was given 30 days to deliver its suggestions to ECC for further consideration.
The ECC also agreed to extend the total consumption package for ex-WAPDA distribution companies (DISCOs) and K-Electric industrial customers until December 31, 2021.
From July 1 to December 31, 2021, BI (Non-ToU) clients will be eligible for a total consumption package at a rate of PKR 12.96 per kWh.