Five export-oriented sectors: ECC decides to increase RLNG rate to $9 per MMBTU

he Economic Coordination Committee (ECC) of the Cabinet has decided to increase the RLNG rate to $9 per MMBTU for five export-oriented sectors across Pakistan and gave approval for an increase in indigenous gas price for export-oriented sectors at Rs1,350 per MMBTU and for the general industry at Rs1,550 per MMBTU.

The meeting of the ECC presided over by the Minister for Finance, Dr Miftah Ismail, on Monday, was submitted a summary by the Ministry of Energy with regard to RLNG rate at $9 per MMBTU, all inclusive to five export-oriented sectors across Pakistan.

The meeting was informed that a subsidy cover of Rs40 billion for RLNG has been allocated under the federal budget 2022-23 which will be reviewed on a quarterly basis.

Furthermore, the ECC recommended the federal cabinet to raise the tariff of indigenous gas for export-oriented sectors at Rs1,350 per MMBTU and for the general industry at Rs1,550 per MMBTU.

The ECC also approved the electricity rate at 9 cents per kWh to five export-oriented sectors from August 1, 2022 subject to (i) subsidy of Rs20 billion provided by the Finance Division, (ii) quarterly review of the subsidy, (iii) Petroleum Division will provide a list of industrial units getting subsidised gas and electricity, within one month to the ECC for review.

Sources said that the Ministry of Energy, in the proposal, submitted that the government decided in 2021 to provide energy to five export-oriented sectors – textiles including jute, leather, carpet, surgical, and sports –at regionally competitive rates i.e. electricity at 9 cents per kWh all-inclusive and RLNG at $6.5 per MMBTU during the fiscal year 2021-2022 to reduce the cost of export sectors and enhance exports.

ECC informed about the ‘benefit’ of proposed move: Hike in gas tariffs likely to yield Rs666bn revenue

The meeting was informed that approximately 65% of total exports are from five export-oriented sectors and such measures including others provided a launching pad for export-oriented sectors leading to increasing the overall exports to $31.79 billion during the fiscal year 2021-22 having an increase of 25.64% as compared to the fiscal year 2020-21.

Realising the importance of continuation of concessionary rates, several meetings were held under the chairmanship of the federal minister for Finance and with federal ministers for Power and Petroleum, relevant ministries, and industry representatives, wherein, the Commerce Division reiterated its position of continuation of concessionary energy tariffs at par with the regional competitors to maintain the momentum of exports.

Whereas, the Ministry of Energy (Power and Petroleum Divisions) requested the Finance Division that the budgetary allocation may accordingly be made in case concessionary tariffs have to be continued during the fiscal year 2022-23.

There was an agreement that;(i) RLNG may be revised from $6.5 to $9 per MMBtu all-inclusive for export-oriented sectors;(ii) for indigenous gas, being provided to other provinces, prices may be revised to $7 for export-oriented sectors;(iii) as there is a restriction on new industrial gas connections RLNG may be provided to the SSGC consumer on the same concessionary tariff as that of the SNGPL consumers of five export-oriented sectors.

The ECC was also informed that Rs20 billion for electricity and Rs40 billion for RLNG have been earmarked in the budget for the ongoing fiscal year to supply energy at concessionary tariff to five export-oriented sectors.

A meeting under the chairmanship of the prime minister was held on July 7, 2022, with the federal ministers for Finance, Commerce, Power and Petroleum Divisions and textile industry on the prevailing issue of tariffs and availability of gas/RLNG and Power.

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

The ministry also wanted that the Finance Division may give a financial commitment that additional funds if required by the Power and Petroleum Divisions would be provided to continue the supply of energy to export-oriented sectors on concessionary tariff.

The ECC meeting has also approved the supplementary grant of Rs750 million for the Ministry of Information and Broadcasting for 75 years with regard to the Independence Day celebrations campaign.

The ECC also approved the proposal of the Ministry of Interior for the payment of compensation/goodwill package from its own budget.

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