ECC approves increase in RLNG price for five export-oriented sectors

ISLAMABAD: The Economic Coordination Committee (ECC) of the Cabinet has given approval to enhance the RLNG rate from $6.5 to $ 9 per MMBTU for export oriented sectors.

The meeting of ECC was held under the chair of Federal Minister for Finance and Revenue Miftah Ismail at the Finance Division.

The Ministry of Commerce (MoC) presented a summary on regional competitive energy rates for export oriented sectors during the financial year 2022-23.

MoC informed the ECC that the government provided energy to export oriented sectors (erstwhile zero rated sectors) namely textiles including jute, leather, carpet, surgical and sports sectors at regionally competitive rates (electricity at $9 cents per kWh all-inclusive and RLNG at $ 6.5 per MMBTU) during FY 2021-2022 to reduce cost of manufacturing and enhance exports. 

Further, the Committees constituted by the ECC in August 2021 with representatives of Finance, Commerce, Power and Petroleum Divisions held several meetings to deliberate on the energy matter and recommended few changes to be incorporated in Textiles and Apparel Policy. Subsequently, the cabinet approved the implementation report of the committee and revised the Textiles and Apparel Policy submitted by the Commerce Division. 

In accordance with approved Policy interventions, energy (Electricity and RLNG) will be provided to export oriented sectors at regionally competitive rates throughout the policy years.

MOC is responsible for exports and approximately 65% of total exports are from five export oriented sectors including textiles. Further, such measures including others provided a launching pad for export-oriented sectors and resultantly overall exports achieved a historical high level of $ 31.79 billion during fiscal year 2021-22 having an increase of 25.64% as compared to the fiscal year 2020-21. 

After thorough deliberations and while considering prevailing financial challenges, it was agreed that RLNG may be revised from $6.5 to $ 9 per MMBTU all-inclusive for export oriented sectors.

Similarly, it was also agreed to revise the prices of indigenous gas, being provided to other provinces to $7 for export oriented sectors.

The ECC was told that Rs. 20 billion for electricity and Rs40 billion for RLNG have been allocated in the budget for the ongoing fiscal year to supply energy at concessionary tariff to five exports oriented sectors.

Keeping into consideration the proposals of textile industry and budgetary space available, it was agreed that electricity at $9 cents per kWh and RLNG at $9 per MMBTU all-inclusive will be provided to export oriented sectors. 

However, only 50 MMCFD will be supplied to captive power plants of export oriented sectors on SNGPL network, till the time supply related issues get settled. 

The ECC was further submitted that textile industry has shown willingness that its captive doe plants in Punjab using indigenous gas primarily for power generation may be shifted to national grid, however it is important to ensure uninterrupted supply and reliability of grid electricity; and sort out issues of new connections, load enhancement and transmission/distribution in first place.

The availability of energy at regionally competitive rates is required to sustain the exports. 

Keeping in view of the above, it is proposed that: Electricity may be provided at US cents 9 per kWh all-inclusive to export oriented sectors namely textiles including jute, leather, carpet, surgical and sports goods from 1st July 2022 to 30th June 2023, RLNG may be provided at US$9 per MMBtu all-inclusive to five export-oriented sectors from 1st July 2022 to 30th June 2023 across Pakistan without any disparity; RLNG may be provided to SSGCL consumers on same concessionary tariff as that of SNGPL consumers of five export oriented sectors and Finance Division may give financial commitment that additional funds if required by Power and Petroleum Divisions would be provided to continue supply of energy to export oriented sectors on concessionary tariff as specified. 

According to the ministry of finance handout, the ECC after detailed discussion approved RLNG rate at $9 per MMBTU, all inclusive to five export oriented sectors across Pakistan for existing gas connections. A subsidy cover of Rs. 40 billion for RLNG has been allocated under the Federal budget 2022-23 which will be reviewed on a quarterly basis.

Further, the ECC recommended to the Federal Cabinet to raise the tariff of indigenous gas for export oriented sectors at Rs. 1350 per MMBTU and for general industry at Rs. 1550 per MMBTU.

The ECC also approved the electricity rate at US cents 9 per kWh to five export oriented sectors from 1st August 2022 subject to subsidy of Rs. 20 billion provided by Finance Division, quarterly review of the subsidy and Petroleum Division will provide a list of industrial units getting subsidized gas and electricity, within one month to the ECC for review.

The ECC also approved a supplementary grant of Rs 750 million for the Ministry of Information and Broadcasting for 75 years’ Independence Day celebrations.