ISLAMABAD: It is going to be difficult for the government to continue to provide regionally competitive (subsidised) gas and electricity to the textile industry amid soaring energy prices in the international market, WealthPK reported.
Recently, the Pakistan Liquified Natural Gas Limited purchased six RLNG (Regasified-Liquified Natural Gas) cargoes for May and June at the rate of $24.2 and $31.8 per metric million British thermal unit (mmBtu), much higher than the $6.5 per mmBtu, the price at which the government is providing to the industry currently under the Regionally Competitive Energy Tariff (RCET) policy adopted in late 2018, reports WealthPK.
Likewise, the cost of electricity generated from coal has also risen by 71% reaching to Rs12.41 per kilowatt hour (kWh) in March 2022 from Rs7.3 per kWh in March 2021.
Moreover, the cost of electricity generated from fuel oil was Rs11.9 per kWh in March 2021, which surged to Rs22.5 in March 2022.
To tap the full potential of the textile sector in Pakistan, it is vital to ensure that energy is available at a regionally competitive rate.
The recent high-growth of the textile sector can be partly attributed to the RCET, according to the All-Pakistan Textile Mills Association (APTMA).
According to the association, during the first nine months of the current fiscal year (July-March) 2021-22, the country’s total exports were $23.33 billion, of which 61% ($14.26 billion) came from the textile sector.
The ongoing year’s exports in the textile sector are 26% greater than the $11.36 billion achieved during the same period of last year.
It is to be noted here that for the export-oriented units of the zero-rated sectors, the government offers a regionally competitive price for RLNG/natural gas at $6.5mmBtu and a fixed electricity rate of 7.5 cents per kWh.
However, electricity tariffs were revised in September 2020 from 7.5 cents per kWh to 9 cents per kWh.
The RCET policy must continue if the textile sector has to realise its full potential and expand its customer base.
The government should also tap the renewable energy potential to provide cheap and environment-friendly electricity to the consumers, especially to the commercial set-ups. Increasing greener energy mix in the national grid will help the country narrow down its ballooning trade deficit.
The government should also gradually reduce the subsidies given to the household sector to help bring down the soaring circular debt in the power sector.
The government can also resort to cross-subsidisation, cutting tariff rates for the industry and jacking them up for the rich households based on their consumption.
INP
