ISLAMABAD: The textile industry has complained to the Prime Minister Office about ‘non-implementation’ of the export-sector support package involving subsidised gas and electricity rates and tax breaks approved by the government and called upon the federal cabinet to take up the matter at its Oct 1 meeting.

In letters to various ministries and the PM Office, the All Pakistan Textile Mills Association (APTMA) called upon the federal cabinet to “review implementation status of the decisions taken by the government”.

“Very painfully and regretfully we want to highlight the two decisions of the cabinet that have not been implemented and have been scuttled in a manner whereby the purpose of the policy decisions has been defeated,” wrote APTMA chairman Syed Ali Ahsan.

The special energy package of 7.5 cents per unit of electricity and $6.5 per unit of combined gas (LNG and domestic gas) and domestic gas at Rs780 per unit (million British thermal unit) was extended early this year to the erstwhile zero-rated industry to provide it a competitive energy tariff to expand and increase exports.

APTMA calls upon cabinet to review implementation status of decisions taken by government

The industry regretted that even after the lapse of one year, implementation of the cabinet decisions on reduced energy rates was selective, partial and subject to irrelevant and non-professional interpretations at the lower levels of the government. As a result, the industry is still unclear about the actual energy tariff for the purpose of quoting export prices of products.

The APTMA said the cabinet had in January this year set a fixed electricity tariff of 7.5 cents without building other charges (quarterly adjustment, fuel price adjustment and various other surcharges) to the export industry which would be part of the subsidy claim to be picked up by the federal government.

It said the situation currently was that distribution companies (Discos) not only charged 7.5 cents per unit until June, but also started charging a quarterly adjustment of Rs1.80 per unit on top of 7.5 cents “in contravention of the cabinet decision”. “It is surprising that a decision of the government is being altered without getting approval of the ECC and the cabinet in contravention of the rules of business,” complained the APTMA.

In addition, it said, K-Electric had refused to implement orders relating to electricity and textile units linked with KE through single-point metering of the Lasbela Industrial Export area had not been able to get the tariff applied to them. KE has reported to the textile consumers that a clarification sought from the power division had not been responded to.

Secondly, in the same manner, the Economic Coordination Committee and cabinet had in September last year decided that gas supply to the industrial sector (exporters of zero-rated section, including textile & jute, carpets, leather, sports and surgical) in Punjab would be revised from 28:72 to 50:50 for domestic gas and LNG, respectively. The weighted average gas tariff of such consumers will be $6.5 per mmbtu. Gas price of similar consumers of SSGCL and those of SNGPL in Khyber Pakhtunkhwa was kept unchanged.

The Oil and Gas Regulatory Authority (Ogra) had notified these rates in October last year but excluded captive power plants from the ambit of zero-rated industry. Later, captive power generation of these export units for self-generation was also included in the same tariff. However, Ogra expressed its inability to notify RLNG/gas weighted price because it cut cross through two legislations — Ogra ordinance and Petroleum Development Levy ordinance. “Somehow or the other implementation of $6.5 per mmbtu has been foiled by the bureaucracy and gas utility,” the APTMA alleged.

At the heart of the problems lied non-payment of subsidy payments by the finance ministry to SNGPL for months. The APTMA said the objective of the subsidised gas rate to reduce the gas pricing disparity within the country and to provide affordable gas to the industry based in Punjab was being ignored by various committees of the government.

Thirdly, it said, the government had committed multiple times before withdrawal of zero rating by rescinding SRO 1125 that the facility for energy purpose would remain protected under the new mechanism. “This commitment is not being fulfilled. Despite assurance in front of the prime minister that the eligibility criteria for the reduced rates will not be changed, there is a strong move to change the criteria to restrict the lower energy rates to direct exporters only,” the industry complained.

It said this issue was untenable because 70 per cent of the feed (semi-finished goods) into direct exporters were from indirect exporters and making their products more expensive would render exports uncompetitive. This is apart from the fact that there is a huge discrepancy between gas tariff of Punjab and Sindh. Lower RLNG prices cover part of the difference as gas/RLNG in Punjab is $6.5 per mmbtu (Rs1,014) as opposed to gas in Sindh which is effectively priced at Rs785 per mmbtu.

“This disparity, if priced at full Ogra notified rates, increases to Rs1,800 versus Rs785 and is clearly unsustainable for Punjab-based industry which constitutes 70pc of the country’s installed capacity in textiles,” the APTMA said.

Based on this situation, the APTMA called upon the federal cabinet to have a review of implementation of its decisions on the issue and settle the matter of energy prices once and for all.

Published in Dawn, September 30th, 2019