Islamabad: The federal government on Monday approved gas subsidies to exporters for nearly a full year and electricity subsidies for three months, despite taking Rs 106 billion in subsidies in the recently ended fiscal year. unable to show any meaningful increase in the volume of exports from
The Economic Coordination Committee (ECC) of the Cabinet approved the supply of RLNG at nine cents per unit and $9 per mmbtu to five export sectors across the country. It has raised rates from $6.5 to $9 but will still bear a subsidy of at least Rs 40 billion on imported gas.
The Ministry of Commerce presented a summary of the supply of affordable electricity and gas for the entire financial year 2022-23, which will cost Rs 129 billion against the subsidy of Rs 60 billion in the budget.
Due to lack of fiscal space, the ECC has currently approved the supply of subsidized imported gas for the entire year, but the electricity will be used until Rs 20 billion is allocated in the budget. Go, starting next month.
According to the Finance Ministry, the ECC approved the RLNG rate of $9 per MMBTU for existing gas connections for five export sectors across Pakistan after detailed discussions. Under the federal budget 2022-23, a subsidy cover of Rs 40 billion has been allocated for RLNG, which will be reviewed on a quarterly basis.
The ECC recommended to the federal cabinet to fix the domestic gas tariff at Rs 1,350 per mmbtu for export sectors and Rs 1,550 per mmbtu for general industry.
The ECC has also approved electricity rates of 9 US cents per kWh for five export sectors from August 1, 2022, subject to a subsidy of Rs 20 billion provided by the Finance Division, according to the decision. According to Power Division calculations, the Rs 20 billion cover will expire in three months (October 2022).
The ECC decided that it will conduct a quarterly review of electricity subsidy and the Petroleum Division will provide the ECC with a list of industrial units receiving subsidized gas and electricity within a month.
The ECC also decided that if any supplementary grant is sanctioned by the Forum in future, the sponsoring ministry will have to neutralize the impact of additional budget to achieve the targets set by the IMF. It will also propose taxation.
The ECC also approved a supplementary grant of Rs 750 million to the Ministry of Information and Broadcasting for the 75th Independence Day celebrations. But it directed the Federal Board of Revenue to prepare a proposal to raise the tax on tobacco to raise revenue equivalent to Rs 750 million.
In August last year, the then government started subsidizing textiles, including jute, leather, carpets, surgical and sports goods, electricity at nine cents per unit and RLNG during the financial year 2021-22. Manufacturing and exports increased at a rate of $6.5 per MMBTU.
There are concerns that exporters are not increasing export volumes meaningfully and the recent increase in exports is largely due to rising commodity prices. The summary of the Ministry of Commerce was silent on the matter of any meaningful increase in the volume of exports during the last financial year despite the subsidy of Rs.106 billion.
The government apportioned Rs20 billion for power within the budget but the Power Division evaluated the entire prerequisites at Rs104 billion and looked for Rs84 billion supplementary allow. The finance ministry denied to supply the endowment due to the commitments with the IMF.
As of June 30, the pending claims of zero-rated mechanical customers is Rs26.2 billion and the Power Division required another Rs6.2 billion fair to clear the exceptional claims of the past financial year, concurring to the Power Division’s note to the ECC.
For the current monetary year, the Power Division requires an extra Rs78 billion as supplementary grant for arrangement of concessional tax to export-oriented businesses for utilization amid the current monetary year.
“In case the government endorses less assignment, the Power Division will decrease the application of the bundle proportionately for such months as can be met from such allocation,” concurring to the Power Division.
The Ministry of Finance has kept up that there’s space within the budget for extra supplementary grant due to commitments with the IMF.
Additionally, the government has too apportioned Rs40 billion for RLNG within the budget to supply imported RLNG at concessionary duty to five export-oriented divisions. But the Petroleum Division has requested Rs11 billion for providing imported RLNG to SSGCL customers –a new endowment program.