Jami us Sani 27, 1437 A.H.
April 06, 2016
KARACHI: President of the Karachi Chamber of Commerce and Industry (KCCI) Younus Muhammad Bashir, while expressing deep concern over descending exports and the reports of further increase in Gas Tariff from July 1, 2016, appealed the government to immediately withdraw Gas Infrastructure Development Cess (GIDC) from the date it was implemented and also withdraw the recently implemented 23 percent increase in gas tariff in order to save Pakistan’s exports from further deterioration.
In a statement issued, President KCCI warned that if appropriate steps were not taken on war footing basis, there will be further decline in terms of exports, especially in the value-added sector.
He was of the view that the industries in Sindh were being penalized in terms of tariffs as the industries in North have been receiving gas at a much lower price (RLNG).
Younus Bashir requested the Ministry of Petroleum and Natural Resources and the Ministry of Finance to seriously look into the production and exports, particularly in the Textile Sector that has gone down by 14 percent which is very alarming.
He said that the business and industrial community of Karachi has been agitating and informing about the descending exports which has been occurring neither because of the inferior quality nor because of the quality of raw material but merely because of the fact that the cost of manufacturing was too high as compared to the neighboring countries.
Referring to a recent announcement by the Petroleum Planning and Analysis Cell of Ministry of Petroleum and Natural Gas, Government of India, President KCCI informed that they have announced a reduction of 20 percent from April 1, 2016 to September 30, 2016 and the new rate of US$3.06/MMBTU on Gross Calorific Value (GCV) basis has been notified by the Indian government which will bring in more competition and will result further decline exports of Pakistan. It is pertinent to mention that the Indian gas tariff rate was already 8 percent lower as compared to Pakistan which has been reduced further by 20 percent, bringing gas tariffs down to around Indian Rs321/ MMBTU whereas in Pakistan, the gas tariff stood at an exorbitant level of Rs488 plus GIDC of Rs100 and 23 percent increase in tariff, escalating it to Rs700/MMBTU, which indicates a difference of around 56 percent.
“It is needless to mention that other challenging aspects remain unresolved including zero rating of export oriented sectors, resolution of pending Sales Tax Refunds, resolution of DLTL claims, Customs Rebates and other pressing problems which have already enhanced our cost of manufacturing”, Younus Bashir added.
He urged Prime Minister Mian Nawaz Sharif, Federal Finance Minister Ishaq Dar and Federal Minister for Petroleum and Natural Resources Shahid Khaqan Abbasi to immediately withdraw GIDC from the date it was implemented and also withdraw 23 percent increase in gas tariffs in order to create an enabling environment for Pakistani exporters who have been facing stiff competition and find it very difficult to stay afloat due to high cost of manufacturing.
He said that although the exporters were compelled to sell under durance with a Stay Order from the court of law in both the implications (GIDC and 23 percent increase in gas tariff) but there is a hanging sword which has taken away the peace of mind of the exporters and while entering into export agreement with foreign buyers, this factor becomes the biggest hindrance.
“Most of the exporters are confident that the decision would come into their favor and their sale minus the impact of GIDC and 23 percent increase in gas tariff would become a positive decision”.
President KCCI further said that the government must understand that the recent announcement was having a serious impact on the exports because the international petroleum prices have gone down by less than one-third so the foreign buyers demand reduction in prices which they do get from India and Bangladesh and these governments take proactive decisions in light of declining petroleum prices to support their exports.
Expressing surprise over the announcement pertaining to gas prices being revised upward, President KCCI advised the government to avoid doing so and appealed to immediately announce withdrawal of GIDC and 23 percent increase in gas tariff. “This is the right time to bring down gas prices in line with the International Petroleum Prices as gas is also a source of energy. Well-head prices from where the government procures the gas is calculated on the basis of WACOG (Weighted Average Cost of Gas) and in the current scenario of petroleum prices, it is directly linked with international crude oil prices, which means the government is getting gas at cheaper prices from the well-head companies so it must pass on the benefits to the industries to make them viable against the competing countries”, he added.