Deepening energy crisis have greatly affected major export-oriented and other sectors of the country. On positive side, it has been reported by an inside source that the federal government has promised to provide electricity to five export-oriented sectors across the country for one year at 9 cents per kWh and $9 per MMBTU, without discrepancy and all-inclusive, susceptible to the transfer of Punjab-based industries to the national grid via indigenous gas-based captive power plants.
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According to sources, the government provided energy to export-oriented sectors (formerly zero-rated sectors) namely textiles including jute, leather, carpet, surgical and sports goods at regionally competitive rates, i.e., electricity at 9 cents per kWh all-inclusive and RLNG at $65 per MMB during FY 2021-22, in accordance with decisions of the Cabinet’s Economic Coordination Committee (ECC) on August 16, 2021, and its ratification by the federal cabinet on August 24, 2021. This initiative was taken to promote exports by reducing production cost.
As a result of the several meetings held by the committees formed by the ECC, on the subject of amending Textiles and Apparel Policy, the Cabinet approved implementation report of the Committee and revised Textiles and Apparel Policy submitted by Commerce Division.
Energy (electricity and RLNG) shall be supplied to export-oriented sectors at regionally competitive rates throughout the policy years, in compliance with approved policy interventions.
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The Ministry of Commerce stated that it oversees exports and recognizes the significance of the export-oriented sectors as five of them including textiles, account for around 65 percent of overall exports.
Furthermore, such initiatives, among others, served as a driver for export-oriented sectors, with overall exports reaching a record high of $31.79 billion last fiscal year, a 25.64 percent rise over FY 2020-21.
Following careful considerations of the stances provided by Ministry of Energy that budgetary allocation may suitably be made in case concessionary energy tariffs have to be continued during FY 2022-23 and Ministry of Commerce which reiterated its position of continuation of concessionary energy tariffs at par with the regional competitors, Finance Division reached a decision while considering financial challenges.
It was agreed that, i). RLNG tariff may be revised from $6.5 to $ 9 per MMBTU all-inclusive for export-oriented sectors, ii). for indigenous gas, being provided to other provinces, prices may be revised to $7 per MMBTU for export-oriented sectors and, iii). as there is a restriction on new industrial gas connections due to shortage of natural gas, RLNG may be provided to SSGCL consumers on same concessionary tariff as that of SNGPL consumers of five export-oriented sectors.
As per the Commerce Ministry, Rs20 billion for electricity and Rs40 billion for RLNG have been approved in the Federal Budget 2022-23 to offer energy at discounted tariff to five export-oriented sectors.
Taking into account the textile industry’s proposals and available budgetary space, Prime Minister Shahbaz Sharif agreed that export-oriented industries would receive power at 9 cents per kWh and RLNG at $9 per MMBTU all-inclusive.
However, until supply concerns are resolved, only 50 MMCFD will be delivered to captive power plants in export-oriented industries via the SNGPL network.
Besides that, the textile industry has expressed willingness to transfer captive power plants in Punjab that use indigenous gas primarily for power generation to the national grid, but that uninterrupted supply and reliability of grid electricity would be guaranteed, and that issues of new connections, load enhancement, and transmission/ distribution would be resolved immediately.