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Thursday, May 30, 2024

APTMA calls for restoring RCET to safeguard Pakistan’s economy

The reinstatement of the RCET for electricity is crucial for mitigating the challenges faced by Pakistan's industries. Without a robust export sector, Pakistan would be deprived of an essential revenue stream required to sustain its foreign exchange requirements.

All Pakistan Textile Mills Association (APTMA) Patron-in-Chief Dr Gohar Ejaz has written to Prime Minister Shehbaz Sharif, requesting take immediate action to reinstate the RCET for gas at a rate of $9/MMBtu and for electricity at a rate of 9 cents/kWh in the upcoming budget.

The reinstatement of the RCET for electricity is crucial for mitigating the challenges faced by Pakistan’s industries and, to some extent mitigating the inter-provincial disparity.

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

Read more: Textile exports expected to fall further by $5 billion in the absence of competitive energy tariffs

This year alone, Pakistan is experiencing a shortfall of over $3 billion, with exports for the year clocking in at only $16 billion. If urgent measures are not taken to reinstate the RCET, this deficit will increase by $4-5 billion in the coming fiscal year. This decline is clearly not in the interest of Pakistan. It can be easily reversed through measures, the most significant of them being competitive energy tariffs which is not a subsidy by any stretch of the imagination.

RCET represents the cost of service incurred, free from the cross-subsidies that the state utilizes to fulfill its socio-political obligations. If the RCET is not restored, then the export-oriented industry could face perilous consequences.

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Without a robust export sector, Pakistan would be deprived of an essential revenue stream required to sustain its foreign exchange requirements. The government should refrain from imposing excessive energy tariffs on the industry through cross-subsidization of others.

Read more: Analyzing Pakistan’s textile industry through the 5F’s framework

Should the government wish to provide subsidies to specific sectors, such as lifeline customers, agriculture, etc., APTMA suggests exploring alternative social programs for fulfilling this objective. It is widely recognized that subsidies, taxes, and inefficiencies can never be exported to international markets.