With high tariffs, Pakistan may miss export goal

Exporters hit out at govt for hike in power, gas tariffs

KARACHI: Rising electricity and gas tariffs, coupled with several other factors, will not allow the Pakistan Tehreek-e-Insaf (PTI) government to realise its dream of enhancing exports as they are making exports uncompetitive in the international market, said Pakistan Hosiery Manufacturers and Exporters Association Chief Coordinator Jawed Bilwani.

In a statement on Saturday, Bilwani termed it surprising that on the one hand, the government wanted to reduce the cost of manufacturing of the export-oriented sectors while on the other hand, it was continuously increasing utility tariffs on the industries.

He suggested that electricity and gas tariffs for the export-oriented sectors should be fixed on a yearly basis.

“Export-oriented sectors should be prioritised because these industries have to make a commitment to the buyers six months in advance,” he said. “Frequent increases in utility charges all the year round jeopardises our entire planning and we suffer huge losses.”

The Ministry of Energy has recently sent a summary to the Economic Coordination Committee (ECC) of the cabinet seeking an increase in gas tariffs on the zero-rated industry to $6.5 per million British thermal units (mmbtu), or Rs1,000 per unit. Bilwani requested Prime Minister Imran Khan to intervene for the best interest of the country.

He also appealed to the government that the announced power tariff of 7.5 cents per kilowatt-hour (kWh) - including all charges - should be implemented across Pakistan including Karachi.

“If the government gives due attention to the sector, then textile exports can rise manifold in the next five years,” remarked Bilwani.

Next Capital Managing Director Muzammil Aslam said when the government increased utility prices, businessmen would pass the impact on to local consumers, however, they could not do so at the international level because foreign buyers would opt for cheaper substitutes.

“This is why countries support their exporters by giving them concessions in different forms such as easy bank loans and low utility charges,” he elaborated. Pakistan’s exports increased 4.5% in the first half of current fiscal year 2019-20 compared to the same period of previous fiscal year.

“It is a good number for Pakistan, however, this is not a phenomenal growth which could be celebrated,” said Aslam. “One crisis after another is battering the value-added textile export sector and recent proposals for a further increase in electricity and gas charges will render this vital sector uncompetitive in the international market.”

He pointed out that the proposed increase in electricity and gas tariffs would increase the cost of doing business.

Published in The Express Tribune, January 26^th, 2020.

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