ISLAMABAD: Finance Minis­ter Ishaq Dar on Thursday anno­unced that he had reached an agreement with the export-oriented sector to continue a regionally competitive electricity tariff (RCET) of Rs19.99 to honour a commitment the government had already made.

The decision came within days after the export-oriented sector, particularly textile exporters, announced the closure of industries for alleged violation of an earlier commitment and the cabinet’s August decision promising electricity supply to export industries at nine US cents per unit for the current fiscal year.

Speaking at a hurriedly called news conference, also attended by some exporters, Mr Dar said the only change he secured from exporters was to “lock the per-unit electricity rate in the Pakis­tan currency at Rs19.99 instead of nine cents in the US currency” because “we should do our business in the local currency”.

This, though, is no material change, given nine cents works out at about Rs20 per unit at the current exchange rate.

All-inclusive concessional tariff of Rs19.99 pegged to rupee instead of dollar

He said the agreed RCET was all-inclusive, meaning the Rs19.99 rate would be final and no fuel cost or tax would be added.

The finance minister said Co­m­­merce Minister Naveed Qamar and Power Minister Khurram Das­tgir Khan were part of the negotiations leading to the agreement and it was now Mr Dar’s responsibility to get it approved by the cabinet or any other forums.

Responding to a question, he said this would have a financial implication of Rs90-100bn over the year as the government wo­uld bear the difference bet­ween Rs19.99 per unit to exporters and the average power rate.

He did not agree that this would cause friction with the International Monetary Fund (IMF), saying he would create fiscal space as sources were available and he would discuss it with the Fund. “Everything will be taken care of,” he said.

Mr Dar recalled that Prime Minister Shehbaz Sharif and his predecessor Miftah Ismail had committed the RCET at nine cents and then implemented it for a couple of days, but it ended on Oct 1 because of some follow-up challenges.

“We should honour our commitments. Our religion also requires this,” he said.

Responding to a question, he said he did not intervene in the market, but the rupee had appreciated from Rs240 to Rs222 since he took a flight from London.

He said the market and its stakeholders had corrected themselves and he was thankful to them, adding that he could contest international lending agencies with data and calculations that the rupee’s true value was no more than 200 to the dollar.

The rupee’s appreciation over the last few days reduced the country’s public debt and liabilities by Rs2.6 trillion without paying a penny, he said.

Earlier, the influential All Pakistan Textile Mills Association (APTMA) had threatened to close mills over RCET’s withdrawal.

“The government’s commitment for provision of RCET tariff of nine cents per kWh [kilowatt-hour] for the FY22-23 electricity is not being honoured,” the association had protested in a letter to the prime minister, adding that the power division had notified the tariff’s discontinuation, and this would lead to a charge of 20 cents per kWh starting Oct 1.

“This notification has led to widespread dismay, panic and closure of factories across Pakistan,” it said.

Published in Dawn, October 7th, 2022