FPCCI says exports may plunge due to revised electricity charges

KARACHI: The country’s export, a key pillar of the economy, could struggle to reach its target during the current fiscal year of 2020 after an increase of almost 70 percent electricity charges for five export-oriented sectors, an apex trade body said on Saturday.

“Upward shift in electricity charges will hurt exports target of $26 billion set under Annual Plan 2019-20,” said Mian Anjum Nisar, president of the Federation of Pakistan Chambers of Commerce and Industry (FPCCI).

The FPCCI’s president, in a statement, pleaded the government to continue electricity tariff of 7.5 Cent/Kwh for Zero-rated sector as announced in the January 2019.

Previously, Pakistan Business Council (PBC), a policy advocacy platform, also criticised the government for additional surcharges, taxes and positive fuel adjustment on export-oriented sectors, saying a ‘policy U-turns, especially with retrospective effect do not bode well for export competiveness’.

“If not reversed, this threatens Pakistan’s exports and will discourage investment in capacity and capability.”

The government had announced an all inclusive tariff of 7.5 US cents/KWh for the five export sectors on January 1, 2019 to enhance Pakistan’s exports competiveness. The ministry of energy on January 13, 2020, however, instructed Discos (power distribution companies) to charge add ons and surcharges amounting to 70 percent, raising the aggregate cost to 13 cents/KWh.

The FPCCI statement said Nisar, a few days back met with the Prime Minister Imran Khan and informed the PM “about challenges and difficulties being faced by Pakistan industry”.

He also informed the Prime Minister that electricity charges in Bangladesh and India are nearly 7-9 Cent/Kwh while in China which is our major trading partner the electricity charges are less than 9 Cent/Kwh.

“The FPCCI emphasized the government to review its decision of changes in electricity tariff and continue the rates as announced to support industry.”

“If the government allow upward shift in electricity rate which is expected to be nearly 70 percent increase in existing 7.5 Cent/Kwh and from January 2019, the exports will be discouraged and our buyer will lose confidence in Pakistani suppliers due delay in exports orders,” the statement added.

The statement said high mark-up rate in Pakistan is also creating hurdles to industrial growth. Interest rates in Pakistan are 13.25 percent while in India is 5.15 percent, China 4.2 percent and in Bangladesh the rate of interest is 6 percent.

Nisair urged the government for continuation and consistency in long term policies once it is announced. “Changes and revisions hurt the industrialist’s plan of production and purchases and booking of orders which is made according to the policy announcement.”