A delegation of All Pakistan Textile Mills Association (APTMA) has recently met the Prime Minister’s Adviser on Commerce, Textiles, Industries and Production and apprised him of the failure of relevant institutions to implement two pro-export policy decisions announced by the government. The first related to repayment of sales tax refunds in cash – to the tune of 30 billion rupees announced recently by the Prime Minister’s Adviser on Finance. Refunds, Shahid Sattar, Executive Director, APTMA, stated remain largely pending with over 100 billion rupees collected during the past five months at the rate of 17 percent sales tax yet to be refunded due to rejection of the majority of applications due to Form H and its associated boundaries for acceptance in the system. More disturbingly, Sattar claimed that even in instances where Form H was accepted and an assurance extended that refunds would be paid within 72 hours, payments remain pending.
And secondly, Sattar claimed that the government’s decision to supply electricity at 7.5 cents per unit, with the objective of ensuring that input costs are comparable to their regional competitors, is also not being implemented since July 2019 with an additional 25 percent quarterly adjustment as well as other charges continuing to be billed. The Lasbela Industrial Estate Development Authority is charging for the rupee depreciation though the 7.5 cents per unit included this element; and 6.5 dollars per MMBTU pledge is being billed at 11 dollars per MMBTU by SNGPL.
The question is why are government decisions taken at the highest level not being implemented? While some may accuse the bureaucracy of deliberately undermining decisions by the government due to either fear of unnecessary investigations by the National Accountability Bureau or because it has become highly politicized yet the lacunae in implementation may well lie elsewhere in this instance. The agreement signed with the International Monetary Fund by Pakistan’s economic team leaders include a pledge to reform the energy sector, with an admission in the Letter of Intent that “the power sector remains saddled with significant shortcomings…(including) sizeable losses, insufficient collections, weak governance and regulatory deficiencies.” In the event that these deficiencies are not tackled, and there is overwhelming evidence that they are not being tackled on a war footing, the government is constrained to raise utility rates to meet the cost of per unit energy production or deny/delay the incentives that it has announced.
And equally, if not more importantly, there is now evidence that the government’s unrealistic revenue target for the current year has not been realised – the shortfall is estimated at 166 billion rupees in the first four months of the current year. Like previous governments, the PTI government too by withholding refunds is simply following the policy of its predecessors.
The government took additional measures recently to push exports including 300 billion rupee additional credit to exporters to resolve their liquidity issues with the government intending to pick up the interest. However, there are concerns that the 200 billion rupee credit envisaged from commercial banks may require more guarantees from the government in terms of picking up the tab for interest payments to begin disbursing the amount. And while Prime Minister Imran Khan flanked by Dr Hafeez Sheikh was shown on the electronic media distributing sales and income tax refund cheques to prominent exporters at a ceremony held at the PM’s House yet it was not revealed as to whether the pledged 30 billion rupee refunds were actually disbursed that day.
Unfortunately, however, there is a continuing disconnect between announced government policy and implementation and one would urge the government that it focuses on plugging all loopholes to ensure implementation in a transparent manner.
(This news/article originally appeared in Business Recorder on November 29th, 2019)