Power tariff reduced to boost exports

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VIAUsman Hanif
SOURCEThe Express Tribune
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KARACHI  :  In order to increase exports and ease the pressure on international payments, the Pakistan Tehreek-e-Insaf (PTI) government has decided to reduce power tariff for the exporters – an incentive that will improve Pakistan’s competitiveness in the global market.

The Ministry of Energy (Power Division) has issued a notification, saying the electricity tariff for industrial consumers will be reduced by Rs3 per kilowatt-hour (kWh) and the difference will be borne by the federal government.

In order to rationalise the tariff for five zero-rated industries – textile, leather, sports, surgical and carpet, the government has fixed the electricity price at 7.5 cent per kWh, according to the notification. The tariff will be calculated on the basis of the last day of a month.

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With the tariff cut, the cost of doing business will go down, which will enable Pakistan’s exporters to sell their products at competitive rates. “This is a small incentive but little things add up and make a big difference,” remarked prominent industrialist Zubair Motiwala.

So far, the government has done only two things including fixing gas tariff at Rs600 per mmbtu with all taxes while others pay Rs780 per mmbtu.

Inefficiencies in power sector cost Pakistan $18b

The government has yet to release refund claims of Rs127.35 billion, of which Rs81.75 billion is related to the Duty Drawback of Taxes (DDT) and Drawback of Local Taxes and Levies (DLTL), Rs10.6 billion is pending in customs rebate and Rs35 billion in sales tax refund.

“Exporters are struggling to get the stuck money. If the government does this all in one go, the export industry can do a lot,” said Motiwala. “We can double our exports in the next five years.”

He pointed out that “if the government reduces our cost of doing business equal to that in Bangladesh, then we can double our exports much earlier.” Bangladesh provides gas at about Rs468 per mmbtu.

Pakistan had also got GSP Plus status from the European Union, which could boost its exports but due to the high cost of doing business, exports were not growing, he said.

“We have to take loans from banks with interest charges to run our business while the government uses our money as an interest-free loan,” said Motiwala. “We pay interest of the government.”

“Textile is a commodity on which nobody has a monopoly, therefore, no one can dictate prices and the customer goes to the one who offers cheaper goods,” he said, adding that Pakistani products should be priced in line with market trends.

If the government reduces our cost of doing business equal to that in Bangladesh, we can double our exports

(This news/article originally appeared in The Express Tribune on January 9th, 2019)

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