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Monday, September 18, 2023

APTMA calls for reinstating regionally competitive energy tariff

The consequences of non-provision of competitive tariffs will be severe. They could result in substantial closure of the industrial sector, widespread unemployment and further depletion of our vital export revenue stream.

Secretary-General of All Pakistan Textile Mills Association (APTMA) Shahid Sattar has written to the Chairman of the Senate Committee on Budget, Mr. Saleem Mandviwalla, to draw attention to a matter of utmost urgency regarding the inclusion of appropriate budget, i.e., Rs.40 billion for gas and Rs. 64 billion for electricity making the total Rs. 104 billion, for the provision of Regional Competitive Energy Tariffs (RCET) for export industry.

The consequences of non-provision of competitive tariffs will be severe. They could result in substantial closure of the industrial sector, widespread unemployment and further depletion of our vital export revenue stream.

Read more: Textile industry is closing due to supply chain disruptions, warns APTMA

The textile industry, a vital pillar of our nation’s economy, experienced remarkable growth in recent years due to the implementation of competitive energy tariffs. In just two years, from FY 2020 to FY 2022, textile exports witnessed an astonishing increase of over 55%, escalating from $12.5 billion to $19.5 billion. This substantial growth is directly attributed to the competitive energy tariffs, which significantly enhanced our industry’s competitiveness on the global stage.

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The perception of RCET as a subsidy is a misnomer. In reality, it represents the cost of service incurred, free from the cross-subsidies that the state utilizes to fulfil its socio-political obligations. Therefore, the significance of this measure and the perilous consequences that await Pakistan’s export-oriented industry if the RCET is not restored/continued must be considered.

Read more: APTMA reveals steps for textile sector’s growth at first ever EconFest

Without a robust export sector, Pakistan would be deprived of an essential revenue stream required to sustain our foreign exchange requirements. APTMA urges the government to refrain from imposing excessive energy tariffs on the industry through the cross-subsidization of others. Should the government wish to provide subsidies to specific sectors, such as lifeline customers, agriculture etc., alternative social programs for fulfilling this objective must be explored. It is widely recognized that subsidies, taxes, and inefficiencies can never be exported to international markets.

“We request the inclusion of the amount of Rs. 104 billion in the upcoming budget. This allocation is crucial for the reinstatement of the Regasified Liquefied Natural Gas (RLNG) Cross-Subsidy Support for gas at a rate of $9/MMBtu and for electricity at a rate of 9 cents/kWh. Particularly emphasizing that the reinstatement of the RCET for electricity is crucial for mitigating the challenges faced by our industries and to some extent mitigating the inter-provincial disparity,” Shahid Sattar said.

Read more: APTMA calls for restoring RCET to safeguard Pakistan’s economy

By safeguarding Pakistan’s exports and employment opportunities, the looming threat of deindustrialization in Punjab and further deterioration in the Balance of Payments can be averted. The loss of approximately $10 billion in exports per annum is a consequence Pakistan simply cannot afford to bear.