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March 28, 2020

Govt allocates Rs23bln energy subsidy for exporters

Business

March 28, 2020

ISLAMABAD: Government has earmarked Rs23 billion as subsidy to bear all the main levies on electricity bills of exporters while extending concessionary tariff of 7.5 US cents per unit for them up to June-end this year, it emerged on Friday.

The five export-oriented sectors would be provided electricity at an all-inclusive rate of 7.5 US cents per kilowatt hour (kWh) from January 1, 2019 up to June 30, 2020, in line with a decision of the Economic Coordination Committee (ECC) of the cabinet earlier this month. “Electricity bills issued from January 2019 till date which included surcharges, quarterly adjustments, FCC, and NJS will be adjusted to fixed tariff of US cents of 7.5 per unit (kWh),” an official document available with The News said. “Taxes of the period will be paid by the consumers.”

Power division of the ministry of energy forwarded the proposal of special relief package for five export sectors in the ECC meeting after the industrial consumers who were previously under zero-rated tax regime raised protest over electricity surcharges that dwarfed the impact of concessionary tariffs.

Industry’s estimate said the electricity bills increase up to 70 percent and put aggregate cost at 13 cents/kWh after the levies. Electricity charges in Bangladesh, India and China are 7-9 cents/kWh. Amid coronavirus-related shutdowns, exporters are expecting three to four billion dollars decline in annual exports this fiscal year. That would lead exports to barely cross the $20 billion mark. Pakistan is already struggling to improve exports sector’s share in GDP from the existing single digit. Exports fell to $22.9 billion in FY2019 from $23.2 billion a year earlier.

The finance division decided to pay Rs23 billion as subsidy to the power division to underpin the subsidy for the current fiscal year of 2019/20.

The document showed that the government would pay Rs14 billion out of the Rs24 billion budgeted allocation for the gas sector, whereas it would fund Rs9 billion through savings from various heads or public sector development program.

The government has already reduced gas subsidy to Rs17 billion from Rs24 billion through reallocations. But, the subsidy would be made up, “subject to availability at the end of year”. “The same subsidy of Rs24 billion will continue for the next financial year as well,” the document said. The government further capped additional subsidy at Rs20 billion for continuation of the relief package in the next fiscal year of 2020/21.

However, industrial consumers are concerned over discrimination in delivery of subsidies across the country. The government on Friday excluded industrial consumers in Karachi from a waiver of late payment surcharge on electricity bills up to 4 July, 2020. It retracted its Thursday’s decision of extending payment date of electricity bill to July this year without late payment surcharge for all consumers. Textile exporter Jawed Bilwani termed this as unfair despite the fact that the city is known as the country’s industrial hub and economic backbone.