KARACHI:,,, SITE industrialists have been concerned over proposals to increase Power and Gas tariff and appeal to Prime Minister Imran Khan to consider not increasing the utilities tariff in the view of ongoing financial crises due to COVID-19 pandemic, so that the industrial production activities can continue uninterrupted.
A meeting of industrialists was held at the SITE Association of Industry to deliberate upon the press conference held by the federal information Minister and Special Assistant to the PM on petroleum. The meeting was attended by Zubair Motiwala, Patron SITE Association of Industry, Abdul Hadi, President SITE, former presidents Jawed Bilwani and Saleem Parekh.
SITE industrialist reminded Prime Minister Imran Khan that the policy which they want to adopt is basically briefed by the concerned ministry that it is inevitable to enhance tariff in order to bring circular debt at zero level. They appealed to the PM that all the briefing which he has received doesn’t declare the reason for accumulation of circular debt with regard to gas circular debt is nothing but the mismanagement, theft, pilferage line losses and cross subsidization to other sectors.
“We are particularly appealing to the Prime Minister in light of his own vision which he has expressed time and again and shown his outright commitment to industry and many times expressed that 2020 beyond would be the wealth making years”, they added. The Prime Minister appealed many times to the business community to invest to create employment and enhance exports and has also offered his commitment to every kind of help in this regard. But when we look at the press conference it looks that it has been held with the consent of the Prime Minister and apparently upward revision of tariff kind of solution has been suggested in this press conference.
They said that the Prime Minister has to understand that this circular debt is not because of the industry as the industry pays more than 98pc of their dues and Unaccounted for Gas (UFG) by the industrial sector is less than 2pc. On the other hand, UFG, theft and pilferages of other sectors are huge and in the domestic sector, it is 40pc. In rural areas of Sindh and Balochistan, it is rampant to an extent of more than 60pc in many cases. Due to old and rusted lines, there are leakages and pilferages, although OGRA does not allow more than 6pc. This has nothing to do with the industry.
They appealed that there are some elements which do not want the PM’s vision to come into reality. It is no rocket science that our competitors are getting energy at the international rates which have slashed down by more than 50pc in the last 2 years and as such, they are getting energy at less than 50pc tariff than us and we are fast becoming uncompetitive with our regional arch rivals in the intentional markets. We have not even reduced 1 cent rather 3 months ago, OGRA has advised to reduce 6pc of the indigenous gas tariff, instead the prices were increased by 33 and 66 rupees by the Notification issued by OGRA.
SITE industrialists added that it is surprising that the vision of the Prime Minister and thinking of Ministries are in almost opposite directions. When they talk about increasing rates, the industry becomes alert because they are paying their dues.
“Basic reasons of circular debt are Selling of gas at less than 30pc of the tariff to fertilizer industry and that burden of 70pc gas is put on the industries through cross subsidization, huge domestic theft, pilferages and line losses, huge losses in commercial sector, in house gas consumption and fixed return on assets of 17pc and 17.5pc to SSGC and SNGPL which are found nowhere in the world and these are the basic areas which create circular debt and not the industry”, they pointed out. If we take out cross subsidization, domestic line losses, commercial line losses, UFG, with no subsidy or reduction in price to industry, industry price comes to less than 700 rupees.
SITE industrialist further stated that the sector which is responsible for 54pc of Pakistan’s exports, was given a bit advantage which has also been taken away and the rate of 786 rupees which was given to the textile sector has now been brought to 930 rupees on the grounds of putting RLNG into the system. The Industry having exports commitments, has no choice but to accept the decision of the Ministry, which should be reverted. It is ironic that the government is penalizing the sector which is the best pay master and putting all the burden as stated earlier on the industries, especially to the textile sector.
They added that we totally support the one singular effort that government which wants to eliminate the circular debt but at the same time, we appeal to the Prime Minister that it has to be collected where it is due and not from the industrial sector which will only bring disastrous condition as many of our competitors do not have this kind of circular debt problem.
“We are linked to the IMF and committed to bring the circular debt at lowest level but at the same time, we should not do it at the cost of employment, exports and imports-substitution industry. We have to do it wisely. We should be clear that in the circular debt shown, there are inbuilt defects of tariff calculations and the Prime Minister must understand that hiking price or the shortfall in revenue is also due to the supplying gas at lower price to fertilizer industry and allied problems”, they added.
There is good intention to create food security for the country and basically this low price gas is being given to fertilizer sector to get the urea at lower price to the growers. Can we do it by cross subsidization? It is a million-dollar question. It has to be done as budget allocation.
IMF sees cross-subsidies as circular debt. There can be different policies to help the growers. This subsidy is being collected from the industry. Domestic is heavily subsidized and it is for the low consumers, 30pc of what they are paying. It is collected from the industry through cross subsidization. Same is the case in commercial consumers and Industry is bearing more UFG than any other consumers.
SITE industrialist suggested that cross subsidy should come to an end and the following measures must be taken by the government. Subsidy to fertilizer sector should be budgeted in the federal budget as subsidy to growers, domestic line losses and pilferages should be collected from domestic consumers, line losses, thefts, pilferages in the rural areas should dealt with by the provincial governments.
The industrialists also suggested to give a detailed presentation to the Prime Minister on the subject matter stating historical facts and current crisis, if right accounts are maintained and shortfalls which create circular debt are dealt with in a proper manner.
They informed the Prime Minister that post Covid-19 scenario would be very competitive for exporters and domestic markets. It is need of the hour that we should go along with the world. Just to give an example, one and half year ago, the price of RLNG which the govt imports was double the price than it is now and if we look at the indigenous gas prices, it was lesser than today. “Price of gas should be reduced because international prices have gone down. It is must for enhancement of exports and manufacturing sector.”