Reversal of tariff relief hurts industry

Businessmen demand restoration of RCET for electricity and gas

KARACHI:

Business leaders have expressed resentment over the government’s recent move of withdrawing the concessionary tariffs of utilities and demanded the immediate restoration of Regionally Competitive Energy Tariffs (RCET) for electricity, natural gas and re-gasified liquefied natural gas (RLNG).

Karachi Chamber of Commerce and Industry (KCCI) President Mohammed Tariq Yousuf demanded that the government restore the RCET for zero-rated sectors with immediate effect, which must also continue in the next financial year so that exporters could be saved from the disastrous situation, according to a statement.

Yousuf stated that the prime minister, finance minister, commerce minister and chief executive of the Trade Development Authority of Pakistan (TDAP) were encouraging the exporters to do more and bring dollars to the country. However, at the same time, they were enforcing negative policies, which would ruin the industry.

The concessionary tariff was provided to five exporting industries which included textile, jute, leather, surgical and sports goods. Accordingly, they were given electricity and gas at a discounted rate compared to other industries, Optimus Capital Management Research Head Arsalan Siddiqui told The Express Tribune.

The policy had its own pros and cons. The difference in tariff was paid by the government in the form of subsidy.

On the positive side, the exporting industries remained competitive in the international market. However, on the negative side, the government had to bear the burden of subsidy and it gave rise to the circular debt which delayed the subsidy, he remarked.

Besides, the International Monetary Fund (IMF) had set a pre-condition to eliminate subsidies in order to qualify for the next loan tranche, the analyst added.

However, despite meeting the demand, the government has failed to get the desired loan installment.

KCCI president pointed out that the government had abruptly withdrawn the RCET for gas despite the commitment to continue it till June 30, 2023 for the zero-rated sectors, whose manufacturing cost had already surged after the withdrawal of RCET for electricity.

It “pushed up the electricity cost by almost 80%, making it impossible for industries to bear the burden”.

“RCET was introduced to make export-oriented industries viable against regional competitors. Its reversal would have a disastrous impact on the whole system. As a result, not only the industries, but also many allied small and medium enterprises (SMEs) and vendors will close down,” he cautioned.

Published in The Express Tribune, May 4^th, 2023.

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