The Ministry of Energy has asked the country’s leadership to set progressive targets for the textile sector and link them with value addition for receiving gas subsidy.
The demand came after a study of the Petroleum Division suggested that domestic sales of the textile sector had increased compared to its exports.
Initially, the government had offered gas supply at a discounted rate to the export-oriented industry. Later, all industries including the ones which were not exporting textile products started getting the subsidy.
Under the facility, subsidised gas is being provided to captive plants of industrial units for electricity generation. Apart from that, subsidy is also being offered on electricity supply to the textile industry.
However, nobody knows where the subsidised gas is being utilised as the textile sector is also receiving uninterrupted electricity supply at a concessionary rate.
Now, Energy Minister Hammad Azhar has called for plugging loopholes and giving subsidy to only those textile units which are able to meet the targets set by the government.
The issue was taken up in a meeting of the Economic Coordination Committee (ECC) while considering the Textile Policy 2020-25.
ECC’s approval was sought for the new textile policy along with the financial matrix and the roadmap for facilitation measures.
The energy minister argued that it was not advisable to provide incentives for the textile sector without setting progressive targets as a huge amount of subsidy was involved.
ECC Chairman and Finance Minister Shaukat Tarin agreed that incentives should be linked with value addition.
He said that loopholes in the system like inefficient captive and co-generation power units should be plugged and targets should be reviewed in order to convey that incentives would only be available where such targets were fully achieved.
Commerce secretary pointed out that the proposal for Drawback of Local Taxes and Levies (DLTL) scheme was under process, which would be brought to the ECC separately after consultation with the relevant stakeholders.
The Planning Division has already asked the government to abolish the subsidy on gas supply to the export-oriented sector, which is also getting subsidy on the provision of electricity.
The Cabinet Committee on Energy has approved another package worth Rs26 billion for the industry by extending the Time of Use (ToU) tariff scheme.
The Petroleum Division also proposed that only the export-oriented industry should enjoy the subsidy on gas supply.
The ECC, in its meeting held on September 17, 2018, had decided that gas supply to the industrial sector, which included textile, carpet, leather, sports and surgical goods manufacturers, in Punjab would be revised to a ratio of 50:50 for domestic gas and re-gasified liquefied natural gas (RLNG) compared to the existing ratio of 28:72.
Despite getting bailouts, the textile sector has not been able to demonstrate any major increase in exports. In fact, cotton imports have risen, which hurt local farmers who have not been able to increase crop harvest due to the lack of research.
The government had decided to conduct an energy efficiency audit of captive power plants. But they later obtained a stay order from court.
The textile industry has yet to pay cotton cess for conducting research on the cotton crop.
Earlier, the government had prepared a policy under which only those millers which paid the cotton cess would be eligible for subsidy schemes. However, under the current government, the textile ministry withdrew the condition for the benefit of big textile millers.
Published in The Express Tribune, October 14th, 2021.
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