Government decides to end subsidy for zero-rated industry

In a major setback to the flagship initiative to increase exports of the country, the government has decided to take back the energy package (RLNG at $6.5 per MMBTU, and electricity at 7.5 cents per unit) earlier extended to zero-rated sector till June 30, 2019. The government has also extended assurance to the International Monetary Fund (IMF) that it will do away with zero rate status to five industrial sectors (textile, leather, carpet, sports, surgical).

“From the next budgetary year, there will be no energy package that earlier the government had extended to zero-rated industry, and the decision has been reversed under IMF pressure,” a senior official close to a government adviser confirmed this to media, but in the next instance he added that the final decision is yet to be taken by the cabinet after due process.

This will certainly trigger, the official said, a massive decrease in exports which may touch $24 billion this year. The government had earlier carved out the plan under which export industry was provided the RLNG at $6.5 per MMBTU and electricity at 7.5 cents per unit at par with the provision of the two inputs of regional economies of India, Bangladesh and Vietnam to ensure the products of Pakistan competitive in the international market but withdrawal of the energy package from the export industry and doing away with the zero-rated sector will make the export industry non-competitive in the global market.

He said that the IMF which is not allowing any kind of subsidy has stepped up pressure on the government and to end the zero-rate industry and withdraw energy package. The IMF also pinpointed saying that Karachi-based textile industry has been provided subsidized gas and electricity tariff for an increase in exports, but the major chunk of its production is sold out within the country to meet domestic needs.

Patron-in-chief of All Pakistan Textile Mills Association (APTMA) Gohar Ejaz responded to the development, saying that this decision will bring down the exports from $24 billion to $21 billion and it will put the exports of Pakistan in jeopardy.

He mentioned that industry in Sindh is getting gas at $4 per MMBTU and 70% of the textile industry of the country, which is in Punjab, will be getting the gas at $12 per MMBTU.

Ejaz said high-level delegation of APTMA will soon meet with the adviser to PM on Commerce, Textile, Industries, and Investment to this effect and will raise concerns on the decision to take back energy package and zero-rated status to export industry. In addition, APTMA will also meet Adviser to PM on Finance and Revenue and Economic Affairs Dr. Hafeez Shaikh and FBR Chairman Shabbar Zaidi.

 

 
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