Govt plans to cut industrial electricity tariff by 44% to revive economy

January 05, 2024 (MLN): The government plans to reduce the electricity tariff from 16 cents to 9 cents per unit for the export-oriented and zero-rated industries to ease the burden, subject to approval from the cabinet and the International Monetary Fund (IMF).

The decision was taken in the Special Investment Financial Council (SIFC) apex committee meeting.

Caretaker Federal Minister for Commerce, Industries & Investment, Dr. Gohar Ejaz during a televised interview emphasized that the high electricity tariff was leading to the shutdown of industries, particularly affecting export-based sectors.

He stressed that this move aims to address the challenges faced by industries and boost GDP growth.

The industries had previously been receiving substantial subsidies of around Rs240 billion per annum.

This, coupled with fixed charges and interest on loans, was contributing to the accumulation of circular debt for the country.

The decision to reduce the tariff is seen as a corrective measure, rectifying a mistake made in February regarding subsidies, he noted.

Responding to concerns about obtaining the nod from the IMF for the tariff reduction, the minister clarified that the government is not providing additional subsidies or grants.

Instead, it is rectifying the previous subsidy allocation.

When asked about the potential shortfall in revenue due to reduced subsidies, Dr. Gohar Ejaz assured that the government has devised a well-calculated formula, as subsidies will be reduced to the sectors ensuring a balanced approach.

He expressed confidence that the IMF would not object to the decision, as it is a strategic move to support industries without introducing additional financial burdens.

The announcement comes ahead of the government's meeting with the IMF in January for the second loan tranche of around $700m.

Boosting Exports

Dr. Gohar Ejaz stated that the primary engine driving the country's exports is the textile sector, which previously accounted for around 60%. However, it has recently decreased to 50% this month.

The exports from the textile sector amount to $1.4 billion, with recent growth in exports observed in sectors other than textiles.

Therefore, the decision is not exclusively for export-oriented industries, as all sectors have the capability to grow their exports. This is why the government is not limiting tariff reduction to any specific sector, he added.

The minister highlighted the vast potential for trade with China. Pakistan currently imports $20bn from China while only exporting around $2bn.

He mentioned that during his visit to China, their commerce minister expressed support and was keen on improving trade relations with Pakistan.

Dr. Gohar Ejaz emphasized the need and opportunity for agriculture, livestock, and beef exports to the Chinese markets.

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