Power subsidy withdrawal to further hit exports: FPCCI

KARACHI: Federation of Pakistan Chambers of Commerce and Industry (FPCCI) on Saturday decried a government decision to withdraw power subsidy to exporters, lamenting that it would affect the already struggling export sector of the country.

Pakistan exports have consecutively declined in last six months, as per the numbers released by Pakistan Bureau of Statistics (PBS). “Abrupt withdrawal of power sector subsidy to appease IMF is set to decrease exports even further,” FPCCI president Irfan Iqbal Sheikh said.

On the IMF demand, Pakistan has discontinued its subsidised energy supply packages to the zero-rated industrial sector and agriculture tube-wells (Kissan Package) from March 1, 2023, to manage the ballooning power circular debt.

The federal cabinet recently approved the summary for ending these subsidy packages, after the approval of the Economic Coordination Committee of the Cabinet (ECC). The Power Division, to this effect, issued two separate notifications earlier this week, saying that these packages stand discontinued from the start of the month, to manage the energy sector circular debt that had ballooned to over Rs3 trillion.

The exports dropped by a hefty 18.67 percent in February 2023 on a year-on-year matrix from $2.83 billion in February 2022 to $2.31 billion, he quoted PBS. “The government is not willing to accept the ground realities and trying to make us believe that the decline is merely in the vicinity of 10 percent.”

Sheikh mentioned that the aforementioned power subsidy had to end by June 2023 with a tangible possibility of renewal or renegotiation.

“However, the government has withdrawn it in the most harmful manner to the export-oriented industries.”

FPCCI chief apprised that textiles and its allied products have the lion’s share in the country’s exports and they had achieved a number of $19.3 billion exports in FY22 in the face of Covid-induced challenges.

Suleman Chawla, senior vice president at FPCCI, highlighted that the textile industry was suffering on multiple counts which included unavailability of sufficient quantities of domestically produced cotton due to floods and continuously reducing crop area, import of cotton on a more than 50 percent devalued rupee in a short-span of less than 1 year; which accounts for 60 percent of the total cost of production of textiles, and unavailability of dollars to settle import letters of credit for raw materials and machinery. Demurrages, container and terminal charges, and acute shortages of raw material of cotton had also contributed in closure of many textile units, he added. Removal of power subsidy to the exporters would put them into delicate situation, Chawla feared.