RCET’s discontinuation to sabotage exports: PHMEA

KARACHI: The discontinuation of Regionally Competitive Energy Tariff (RCET) of gas and electricity for the five export-oriented sectors will sabotage national exports, a statement said.

The continuation of RCET is inevitable in the national interest, as in the face of the ongoing economic debacle in Pakistan and political wrangling, the industrialists and traders are confronting despondency with a major halt and uncertainty in business activities.

While the Pakistan Stock Exchange (PSX) crashed several times, the skyrocketing inflation and the historic rupee depreciation has crippled the commerce and industry and the only performing sector is exports, which is earning foreign exchange in these most difficult times, generating revenue and providing highest employment.

Any imprudent and unwise decision of the federal government to discontinue RCET for the five export-oriented sectors would be disastrous and will also destroy relentless struggle and efforts of the exporters to enhance exports.

The fate of export investors will hang in balance, as they have invested billions of rupees in the textile industry.

The textile exports were on top with highest share of 61 per cent in the total exports of $19.4 billion in 2021/22 with a significant enhancement of over 25 per cent.

The Pakistan Hosiery Manufacturers and Exporters Association (PHMEA) represents knitwear in the textile group, which has achieved the highest growth and enhancement in exports, which remained $5.1 billion in 2021/22 with an increase of 26.5 per cent.

The total national exports stood at $31.79 billion with an increase of 25.64 per cent, compared with the previous fiscal year.

In the wake of the economic turbulence for the last six months, the textile exports have witnessed a decline of 7 per cent, while the national exports have faced a downfall of 5.73 per cent.

If RCET is discontinued, it will impact in further decline in exports of the five big export sectors.

The value-added textile exporters are highly distressed over the news that the government on the demand of the International Monetary Fund (IMF) has decided to increase RCET (gas and electricity) for export industries with an increase of 34.31 per cent raising the tariff from Rs819 to Rs1,100 and 30 per cent increase in raising the tariff of the captive power of the export industries from Rs852 to Rs1,100, retrospectively from January 1, 2023, which will make the textile export industries unviable to operate and lead to massive closures and huge layoffs.

The government has also decided to upward revise the electricity tariff for export-industries from March 2023. A 50 per cent of the SME textile export industries have already closed their production and shut down their operations in the wake of the economic uncertainty, alarming variation of the dollar against the rupee and the shortage of raw materials to manufacture goods meant for exports, owing to the restrictions on opening the letters of credit (LCs) by the government.

To save the national exports and its sustainability, continuation of RCET is compulsory.

The exporters have also expressed dismay over the word ‘subsidy’, saying that the government was providing budgetary allocations for concessional tariffs to the export industries to ensure level-playing field for the purpose of regional competitiveness and exports enhancement.

It is not the ‘subsidy’. Fact of the matter is that the industries are actually burdened and cross-subsidised for gas tariffs to give subsidy to the fertiliser and domestic sectors.

The exporters have cautioned the government to be conscientious and any thoughtless decision or unwise move on the dictates of the IMF must be refrained, which will bring any negative impact on the exports and forex influx and RCET for export industries must be continued and the IMF should be persuaded, accordingly.

Otherwise, in view of the unviable cost of manufacturing, the exports will suffer and the prime minister, finance minister and their economic team would be solely responsible for the decline in exports and a further depletion in the forex reserves.

Instead of relying and depending on the international lending organisations, the government should rely and depend on the Pakistani exporters who are earning foreign exchange for the country, as they also do not transfer their remittance outside Pakistan.

The exports cannot be enhanced unless the government stops its dependency on lending organisations and loans and instead decide for self-sustainability by encouraging and relying on its local business community and citizens.

It is the need of the hour that the government may introduce more facilitation and incentives by creating most enabling and conducive environment so that the business community would prefer to opt for establishing export industries to earn valuable foreign exchange for the country.

This was stated by Muhammad Jawed Bilwani, patron in-chief, Pakistan Hosiery Manufacturers and Exporters Association (PHMEA) and Muhammad Babar Khan, central chairman, PHMEA, in their joint statement.

The RCET must be freeze at least on a yearly basis as the textile industry has to make commitments for six months or a year in advance and, as such, any abrupt change and increase in between the year will jeopardise their entire planning and they suffer huge losses to keep up the commitments to their foreign buyers.

The PHMEA urged the federal government to continue supporting the five export-oriented sectors for the sake of economic stability, employment creation and revenue generation.