ISLAMABAD: Finance Minister Shaukat Tarin has constituted an inter-ministerial committee to deliberate on the issue of misuse of RLNG supply at concessional rates to export-oriented industry and submit viable recommendations to the ECC for consideration, sources close to SAPM on Power and Petroleum told Business Recorder. On August 16, 2021, the ECC was briefed that the availability of energy at regionally competitive prices was required especially in Covid-19 scenario to sustain exports.
In this regard, following proposals were submitted to the forum for consideration and approval: (i) electricity may be provided at US cents 9 per kWh all-inclusive to export oriented sectors namely textiles including jute, leather, carpet, surgical and sports goods during Financial Year 2021-22; (ii) RLNG may be provided at $6.5/MMBTU all-inclusive to export oriented sectors during Financial Year 2021-22; and (iii) Finance Division may give financial commitment that additional funds, if required by Power Division and Petroleum Division, shall be provided to continue concessional energy rates to export oriented sectors. However, Ministry of Energy may apprise relevant ministries regarding the budgetary situation in time so that the Commerce Division may place a summary for supplementary grant allocation before the ECC for consideration.
During threadbare discussion in the ECC on this issue it was observed that the present Government is making strenuous efforts to boost exports. And export-oriented sectors have been provided electricity and RLNG at subsidized rates.
It was argued that there is a need to conduct competitiveness study to see the impact of subsidy on exports. A study was conducted in the past that proved hardly any correlation between the two. However, an objection was raised at this notably that it was a single factor study and the issue needs to be analysed by considering all relevant factors. The SAPM on energy emphasized the need for targeted subsidy.
The Minister for Finance and Revenue stated that there is a dire need to stop misuse of gas. The subsidy should not be extended to those industries which are expanding their local market share on the basis of the relief. Further, he stated that it may not even be extended to low value-added industries next year. However, current momentum should not be disturbed at this stage.
The ECC also discussed the issue of misuse of RLNG. It was agreed that a committee should deliberate the issue and submit recommendations to the ECC. The Terms of Reference (ToRs) may include the misuse of RLNG by inefficient captive power plants for generating electricity, stay orders sought by the industry, getting subsidy from the government, refusal to conduct audit in spite of the decision of the cabinet etc. Overall objective would be to stop misuse of gas by the industry.
It was observed that a study may be conducted either by the SBP or PIDE to evaluate the impact of concessional rates of electricity and RLNG on the export oriented sectors and by giving due consideration to other relevant factors.
After threadbare discussion, the ECC approved the proposal to extend electricity and RLNG to export-oriented sectors at cents 9/kWh and $ 6.5/MMBTU, respectively.
The ECC also constituted a Committee under the convenership of Minister for Energy and consisting of Minister for Industries & Production, Special Assistant to the Prime Minister on Power & Petroleum, Adviser to the Prime Minister on Commerce, Deputy Chairman Planning Commission and Anwar Sheikh, Senior Joint Secretary Finance Division to deliberate the issues of misuse of RLNG supply at concessional rates to export oriented industry and submit viable recommendations to the ECC for consideration.
The Committee may co-opt any members/officials as deemed appropriate. Commerce Division will provide secretariat support to the committee.
Copyright Business Recorder, 2021