July 26, 2022
ISLAMABAD: The government is set to begin removing restrictions on the import of “non-essential and luxury items” imposed on May 19 and provide energy at subsidised rates — electricity at nine cents per unit and gas at $9 per unit — throughout the current fiscal year to make the country’s exports competitive.
Sources told Dawn that a special virtual meeting of the Economic Coordination Committee (ECC) had been scheduled for Sunday to approve the subsidised energy rates, but was then postponed at the last moment for a day to be merged with another huddle on Monday with important items on the table.
The sources said the government expected about $3 billion inflows from “some friends” during the current week and wanted to give a “confidence and feel-good sense to the market” by supporting five export-oriented sectors and simultaneously clearing import payables and gradually easing restrictions on most imports (except mobile phones and automobiles) imposed on about 85 items for a temporary period.
In consultation with energy and finance ministries and the export sectors, the commerce ministry has sought the supply of electricity at a final, all-inclusive rate of nine cents per unit (kilowatt-hour, or kWh) to five export-oriented sectors — jute, leather, carpet, surgical and sports goods — from July 1, 2022, to June 30, 2023.
Secondly, the imported and regasified liquefied natural gas (RLNG) would be provided to these sectors at an all-inclusive rate of $9 per unit (million British thermal units, or mmBtu) instead of $6.5 at present. The rate will be applicable across Pakistan without any disparity.
As such, RLNG would be provided to consumers of Karachi-based Sui Southern Gas Company Limited (SSGCL) on the same concessionary tariff as that for Lahore-based Sui Northern Gas Pipelines Limited (SNGPL) consumers of five export sectors.
At present, there is a restriction on new industrial connections due to a shortage of natural gas. The government has already allocated Rs60bn for these subsidised rates — Rs20bn for electricity and Rs40bn for RLNG — in the federal budget for 2022-23 to supply energy at concessionary tariff to these sectors.
The finance ministry would give a financial commitment that additional funds, if required by power and petroleum divisions because of higher international prices, would be provided to continue the supply of energy to the export sector at unchanged rates.
It has, nevertheless, emphasised that additional subsidy was not permissible under the IMF programme and the energy divisions should seek timely adjustments in rates to stay within the allocations.
At a higher level, it was decided that power and petroleum divisions would be required to alert the finance ministry in advance and move a formal summary for a supplementary grant from the ECC in a timely manner.
The case for fixed energy prices comes before the ECC as a formality for approval following a decision taken in principle by Prime Minister Shehbaz Sharif at a meeting attended by ministers for finance, commerce, power, petroleum and representatives of the textile industry.
It has been accepted at the policy level that regionally competitive rates had provided a launching pad to exports, which jumped 26pc year-on-year to $32bn in the previous fiscal year. Therefore, fixed rates for the current year and regionally competitive rates throughout the 2020-25 Textile and Apparel Policy would be ensured to maintain the export momentum.
While reviewing the issues of regionally competitive tariffs and the availability of power, gas and RLNG, the meeting had decided that keeping in view the expensive energy imports, textile sector’s proposals and available budgetary space, “electricity at nine cents per kWh and RLNG at $9 per mmBtu all-inclusive will be provided to export-oriented sectors”.
It was, however, reported that only 50 million cubic feet per day of gas would be supplied to captive power plants of export-oriented sectors on the SNGPL network till the time supply-related issues arising out of tough international markets get settled.
The textile industry agreed that its captive power plants in Punjab using local gas primarily for power generation would be shifted to the national grid.
However, it would be important for the gas and power companies to ensure uninterrupted supply and reliability of grid electricity and sort out issues of new connections, load enhancement and transmission and distribution in the first place.
The ban on the import of mobile phones and automobiles would, however, remain in place for the time being because of their big foreign exchange impact. Most other items had lower foreign exchange costs and larger value addition and employment impact, the sources said.
These sources, however, explained that expensive phones and automobiles already in the import process at the time of the ban had already been given relief last week by allowing their clearance from the port at 5pc surcharge after their arrival within two weeks since May 19 and at 15pc surcharge for items that arrived two weeks after the ban and before June 30.
Relevant statutory regulatory orders (SROs) were issued on July 22 to exempt timber/wood import from the ban and clear shipments arrived at ports, including mostly automobile items with 5pc and 15pc surcharge.
The sources said the ECC would also take up for formal approval and implementation a federal cabinet decision taken in February to amend the Imports and Exports Control Act 1950 to change the words “federal government” with the “minister in charge” to allow one-time permission for import, export or re-export on a case-to-case basis.
The government had imposed a complete ban on the import of 30 categories involving about 85 customs headings, including automobiles, mobile phones, home appliances, fruits and dry fruits (except Afghanistan), crockery, private weapons and ammunition, shoes, chandeliers and lighting (except energy savers), headphones and loudspeakers.
Other heads include sauces, doors and window frames, travel bags and suitcases, sanitary ware, fish and frozen fish, carpets (except Afghanistan), preserved fruits, tissue paper, furniture, shampoos, confectionery, luxury mattresses and sleeping bags, jams and jelly, cornflakes, toiletries, heaters, blowers, sunglasses, kitchenware, aerated water, frozen meat, juices, pasta, ice cream, cigarettes, shaving goods, luxury leather apparel, musical instruments, salon items like hair dryers, etc., and chocolates.