ISLAMABAD: Prime Minister Shehbaz Sharif has directed relevant ministries to convene meetings of relevant stakeholders for consultation on revision of seed cotton support price, finalization of Weighted Average Cost of Gas (WACOG) enforcement mechanism and processing requests for extension of load (EoL) and new electricity connections.
The Prime Minister’s Office (PMO) issued these instructions to the Ministry of National Food Security and Research, Petroleum Division, Energy Division and Ministry of Commerce, in response to a letter written by All Pakistan Textile Mills Association (APTMA).
The PMO also advised APTMA to approach the National Tariff Commission (NTC) regarding their anti-dumping duty grievances on polyester staple fibers, in accordance with applicable rules/policies.
The PMO also directed that consultations be undertaken with relevant stakeholders to review the Energy Division’s proposals on the disbursement of subsidies to export-oriented sectors.
APTMA, in its letter to the Prime Minister, shared proposals to support and accelerate textile exports.
On APTMA’s proposal to announce a cotton support price of Rs. 8,000 per maund of Phutti for the coming season, the Ministry of National Food Security and Research said that the intervention price 2021-22, although approved at the end (August) of the season, allowed better crop management by producers and an improvement in production despite a drop in the area under cultivation compared to the ‘last year.
Instead of this result, the government approved the intervention price policy before the start of the planting season (March) to influence farmers’ decision on cotton planting.
The ministry argues that the already approved intervention price is being revised with the government’s agreement to attract more farmers to cotton farming.
The value-added textile sector is unhappy with the rise in key rates
On APTMA’s proposal to announce a cotton support price of Rs 8,000 per maund of Phutti for the coming season, the Ministry of Commerce said that in order to revive cotton production, the Ministry of National Food Security and Research (MNFSR) submitted a summary to the Cabinet ECC and proposed “to set the threshold intervention price of seed cotton at Rs. 5,700/40 kg, trigger the seed cotton intervention price with a 10% discount on the import parity price estimated using the Cotlook A Index when domestic prices fall below this threshold and provide a cash credit limit to the Trading Corporation of Pakistan (TCP) to procure two million bales at the intervention price.” The Cabinet CEC endorsed the summary submitted by the MNFSR on March 17, 2022 and the decision was ratified by the Cabinet on March 17 2022.
To revive national cotton production, the MoC supported the MNFSR’s proposal to set an intervention price; however, the MoC argued that a better option to encourage cotton planting and improve yield would be to provide high quality seed and a direct subsidy mechanism to farmers or fertilizers and pesticides instead of sourcing from of the ginning industry by the PCT.
The Ministry of Commerce did not support APTMA’s proposal to set the intervention price at Rs. 8,000 per maund as it has no correlation with the cost of production calculated by API (MNISR) nor no rationale.
Commenting on APTMA’s proposal that duties on PSF fibers can be reviewed and anti-dumping duties removed to allow Pakistani export products to be internationally competitive, the Ministry of Commerce said that the tariffs and anti-dumping tariffs on PSF fibers are subject to national protection and the international regulatory framework.
The NTC is an independent investigative authority of the GoP on trade and tariff matters, including domestic protection and anti-dumping. APTMA may be advised to submit its application/reference with supporting evidence to the NTC for investigation in accordance with prescribed rules/regulations and procedures.
The MoC maintained that in accordance with the Textile and Apparel Policy, 2020-25 approved by the ECC on February 9, 2022, power (electricity and RLNG) will be supplied to the textile industry sectors and export-oriented apparel products at regionally competitive rates throughout the policy. years.
For fiscal year 2020-21, electricity is supplied at 9 cents per unit and RLNG at $6.5 per MMBTU at par with regional competitors. For the next policy years, regionally competitive energy tariffs will be offered to export-oriented sectors in accordance with the strategic intervention approved under Section 2.2.2 of the Textiles and Apparel Policy 2020-25.
On new connections, Power Division, said M/s APTMA can provide a list of cases pending new connections.
Commenting on the regionally competitive electricity tariff of 7.5 cents/kWh across the entire value chain, the Energy Division argued that instead of providing electricity at a preferential to export-oriented sectors, subsidies to export-oriented sectors should be paid, based on export receipts verified by the RBF, instead of linking it to zero-rated status.
Accordingly, zero-rated industrial consumers may be charged at the rate notified by the GoP and the subsidy shall be administered by the Ministry of Trade/Textile Industry based on the following principles: (i) the Ministry of Trade/Textile The textile industry can set the subsidy rate based on the analysis of actual electricity expenditure per export revenue in dollars at the HS code level, for all categories of zero-rated exports; (ii) subsidy rules against HS codes can be updated in the WEBOC system; (iii) upon receipt of export proceeds, exporters’ subsidy application can be processed based on WEBOC’s calculations following the same pattern as the Duty Drawback Scheme (DDT/DLTL).
On the issue of gas/RLNG priority, the oil division said there was no major change in the order of priority in winter, except that the fertilizer sector was moved to second place, on par with the electricity sector for the Rabi season given food security concerns. from the country. In addition, on the recommendation of the Ministry of Commerce, a list of the top 50 export units were supplied with gas without interruption, given their importance as an export substitute.
No change in priority was made to give priority to the non-exporting sector over the zero-rated industry. New connections and load improvement on RLNG are allowed. However, in order to promote efficient use of a natural resource, the supply of gas to captive energy has been prohibited and only the supply of gas for cogeneration is permitted. The Petroleum Division is willing to supply RLNG at a preferential rate of USD 6.5/MMBTU subject to the provision of a subsidy by the Finance Division.
In order to implement WACOG, the OGRA Ordinance was amended. Currently, the oil division is considering several options for designing a pragmatic application of WACOG. Upon finalization of this matter, necessary guidance and instructions will be issued to OGRA and Sui companies.
Copyright Business Recorder, 2022