Muhammad Mudassar

Textile exporters have expressed concern over discontinuation of the regionally competitive power tariff (RCPT) of 9 cents per KWH. According to the Ministry of Finance, the discontinuation of RCPT is meant to comply with the conditions imposed by the International Monetary Fund (IMF). According to Finance Division, in case of any additional funding requirements, the matter will have to be discussed with the IMF, in consultation with the Ministry of Energy, as and when required.

Under the RCPT, the government started to supply electricity to five export-oriented industries at 7.5 cents per kWh and LNG at $6.5 per mmbtu. In September 2020, the electricity tariff increased to 9 cents per kWh. On July 27, 2022, the government decided to continue the supply of electricity to export-oriented industries at 9 cents per kWh. According to that decision, this RCPT was applicable till the end of FY 2022-23 with a cost of more than Rs80 billion.

During a meeting on August 19, 2022, the Cabinet Division decided to review the decision made on July 27, 2022. In an appeal to the prime minister, exporters have demanded to maintain the RCPT in order to boost exports and economic growth, which will prove beneficial for the nation.

Omar Farooq, a textile businessman, while talking to WealthPK, said that the energy tariffs have the most significant impact among all the factors that make textile exports regionally uncompetitive.

“It also implies that a small change in the factor costs brings with it a substantial impact on the country’s export performance,” he said.

Textile exports play an important role in the economy of Pakistan. The textile industry contributes around 60% to exports. During FY 2021-22, exports significantly increased, even though COVID-19 slowed down the pace of trade around the globe.

According to All-Pakistan Textile Mills Association (APTMA), during FY 2022, textile exports reached the highest level of $19.4 billion. Pakistan is an agricultural country but the overall share of textile export is very low.

According to a study by Pakistan Institute of Development Economics (PIDE) Islamabad, total global textile exports stand at $792 billion, while Pakistan contributes only 1.7%.

There is a need for the government to support the industrialists in order to increase textile exports. Energy is one of the important inputs in the production of any good. Increasing energy costs result in higher input costs, making the product uncompetitive on the market.

Credit : Independent News Pakistan-WealthPk