Ballooned electricity tariff: 'No investment in Pakistan if govt’s notified decisions, policies negated'

ISLAMABAD: The textile industry has told the government that no industrialist and businessman will invest in Pakistan as the Power Division has backed out of the notified 7.5 cents per unit electricity tariff for export oriented sector. This has resulted in a total loss of confidence in government’s policies.

The All Pakistan Textile Mills Association (APTMA) stated this in a letter written on January 28 (Tuesday) to Omar Ayub Khan, Federal Minister, Ministry of Energy. This is the second letter with subject ‘Unjustified Excess Billing to the Export Oriented Sector’ in a row during the ongoing month of January 2020.

In its latest letter, APTMA, while mentioning the chronology of the approval of 7.5 cents per unit all inclusive electricity tariff, built its case arguing that the Power Division has deviated from the government policy and imposed financial cost surcharge, the Neelum-Jhelum surcharge, taxes, fixed charges and positive fuel adjustment in the electricity tariff for export oriented sector, which was decided and notified earlier at 7.5 cents per unit.

The letter mentions that the Power Division was in total disregard of ECC and cabinet decisions, which had been clarified earlier through letters dated February 8 and March 29, 2018 which state: ‘I am directed to state that the issue of financial cost surcharge (FC), Neelum Jhelum Surcharge (NJ), taxes, fixed charges and positive fuel adjustment was discussed in the ECC in its meeting of January 29, 2019. It was clarified by the ECC that the zero rated industry would be charged 7.5 cents per unit tariff only and all the aforementioned elements would not be charged to the zero rated industry but would be a part of the subsidy claim to be picked up by government.”

“The explanations now being given by the Power Division are misleading in the extreme and it is rather unfair that the Power Division is penalizing the exporting sectors for its own shortcomings.”

The letters says that it was decided and clarified that the concessionary rate of 7.5 cents/unit for zero rated industrial consumers notified through SRO No. 12(1)/2019 was only limited to the extent of schedule of tariff notified through SRO. Nos 01 to 10 dated January 01, 2019 and SRO No. 11(1)/2010 dated January, 2010 for K-Electric as amended from time to time. “Consequently, all other charges mentioned in para 1 above are to be billed to consumers in addition to the already billed components. Accordingly, it is communicated, that the above decision may be implemented forthwith for the purposes of recovery of arrears on account of the above items through easy installments of Twelve (12) months.”

Now the DISCOs have started billing the so-called arrears in 12 equal installments, which have effectively doubled the additional illegal surcharges on top of 7.5 cents per unit.

APTMA says in the letter that these are closed and past transactions, over a year old where goods have been made, shipped, sold and accounts have been closed. It is highly unreasonable to expect the industry to pay anything above 7.5 cents/unit from January 2019 which are past and closed transactions, the entire last year. The 7.5 cents all-inclusive tariff was committed by the prime minister, approved by the ECC and cabinet and stated very clearly and categorically at numerous occasions by various government office-bearers.

The letter said: “Industry just cannot bear these additional illegal backdated charges and which will result in closures, bankruptcies and widespread unemployment. Industry shifted from other cheaper sources of energy to grid electricity based on the assurances given by the state. It is extremely regrettable that the Power Division has shifted its stance and is bent upon nullifying all the progress in exports and industrialization made over the past eighteen months.

“It may be noted that the goods that were sold were costed at this rate and as a result the industry managed to increase volumes by over 30% despite severe global slowdown. Had the tariff of 7.5 cents per unit not been assumed, exports would have decreased substantially.

“This additional illegal charge on the industry is without any doubt the fault of the Power Division as the Power Division in the summary to the ECC and cabinet dated October 24, 2019 wherein approval of 7.5 cents all in tariff was obtained stated ‘Power Division or DISCOs will reduce on-going losses and improve fresh recoveries for which a target of Rs60 billion is set for the current financial year 2018-2019. In addition, recovery of past dues to the tune of Rs80 billion will also be ensured during CFY, to off-set the impact of industrial support package.’

“As a result of this written submission by Power Division no subsidy was budgeted for maintaining the all in 7.5 cents per unit tariff for the exporting sectors. Consequently, when Power Division failed to make the improvements committed and the circular debt started to increase, Power Division went to the Finance Division seeking a subsidy for the difference. Since they had not provided for it naturally the Finance Division refused.

The explanations now being given by the Power Division are misleading in the extreme given the clarifications reproduced above. It is rather unfair that the Power Division is penalizing the exporting sectors for their own shortcomings.”

APTMA requested the Power Division to reconsider this decision as the backing out of this clarified and ECC and cabinet-approved commitment to the exporting sectors will result in total loss of confidence in government’s commitments or policies. Under these circumstances, if the Power Division persists in implementing their illegal and illogical reinterpretation of the 7.5 cents per unit tariff, no industrialist or businessman will invest in Pakistan as commitments/ policies of the government will carry no sanctity or weight.