Raza Khan

The export industry has expressed concerns over the government’s decision to eliminate electricity tariff subsidy. “Suspending the special electricity tariff for export-based industries will further add to its difficulties,” Shahid Sattar, Secretary General of All Pakistan Textile Mills Associations (APTMA), said in a statement. He said energy shortage and high prices of electricity and gas are among the reasons that forced many factory owners to shut down their production units.

On March 30, the government formally announced that it has suspended the electricity package that was being provided to export-based industries. “The government has suspended the special electricity tariff package for five export-based industries, and now they are being provided electricity on normal rates,” Parliamentary Sectary for Power Rana Iradat Sharif told the National Assembly of Pakistan.

Last year, the government announced an annual subsidy of Rs100 billion to set the electricity cost for the five export-oriented sectors at Rs19.99 per unit. Shahid said that textile sector was hardly surviving as its production and earnings were way below the actual potential. “If the textile sector is closed under the current unfavourable conditions, there will be massive unemployment in the country,” he added.

He said that textile sector is already facing several challenges, including non-opening of letters of credit (LCs) by banks for import of raw material, shortage of cotton, liquidity crisis and falling exports. Pakistan Readymade Garments Manufacturers and Exporters Association (PRGMEA) has also expressed concerns about the government decision to withdraw subsidy on electricity tariff.

“It will make our industry uncompetitive in the region,” the PRGMEA said in a statement. It said the government should immediately restore the electricity package for export-based industry. The association added that it would be hard for the industry to survive if subsidies on energy tariff are not restored by the government. The PRGMEA said Pakistan would lose more in foreign exchange if exports decline due to this decision aimed at saving a few billion rupees. 

However, Muhammad Zeeshan, Research Fellow at Pakistan Institute of Development Economics (PIDE), said the elimination of export subsidy was a crucial step for boosting competitiveness in international trade. He argued that with the elimination of these subsidies, firms would be forced to become more self-sufficient and adopt new strategies for success, resulting in a more dynamic and resilient private sector.

“The export industry should innovate and adopt modern tools of business instead of demanding subsidies which the country is unable to afford in the present economic situation,” he suggested. Moreover, he said the elimination of high import tariffs would provide more affordable access to intermediate and final consumption items, both for firms and consumers.

Credit: Independent News Pakistan-WealthPk