LAHORE: Federation of Pakistan Chambers of Commerce and Industry (FPCCI) demanded of the government to reduce the interest rate to 12 percent. The electricity price should be reduced to 9 cents for all industries. Contracts with Independent Power Producers (IPPs) should be revisited. Cross subsidies of Rs240 billion should be eliminated and tax on the retail sector should be taken at the final stage.
The FPCCI Regional Chairman and Vice President Zaki Aijaz stated this while addressing a press conference here at FPCCI Regional Office on Wednesday.
He stressed that the conditions regarding non-filers should be made strict. The industry in Federally Administered Tribal Areas (FATA) and Provincially Administered Tribal Areas (PATA) regions has benefited greatly and should be taxed in a phased manner in the next two to three years.
As the budget is being prepared, the government should consider the suggestions of FPCCI.
Zaki Aijaz added that if the government decreases the electricity rate to 9 cents and brings the interest rate to 12 percent, the closed industries will restart their operation by consuming 3,000 megawatts of electricity thus generating Rs500 billion revenues for the government.
Zaki Aijaz mentioned that many large and small-scale factories have been closed and are waiting for the budget. If the government does not give them relief in the budget, more factories will be closed, he apprehended and argued that industrialization is impossible at 22 percent interest rate and 16 cents for electricity.
He said that since the rate of inflation has decreased from 37.97 percent in May 2023 to 11.8 percent in May 2024, the interest rate should also be reduced accordingly.
He emphasized that the Special Investment Facilitation Council (SIFC) had reduced the electricity rate to 9 cents, but yet to be implemented.
Zaki further said that industries can only function, once the issue of IPPs is settled. Rising electricity prices are increasing business costs and making the products less competitive in the international market.
Regional Chairman FPCCI said that State Bank of Pakistan (SBP) has set the policy rate at a staggering 22 percent, asserting, ‘we understand the intention behind this measure is to curb inflation, but the high interest rates are stifling business activities and making the cost of doing business unbearably high and is hampering economic growth and investment.’ He said that the neighboring countries functioning on energy prices at an approximate rate of 7 cents. “We urge the government to implement measures to stabilize energy prices at 9 cents and ensure a fair pricing mechanism that does not overburden industrial consumers.”
Zaki Aijaz said that the current cross-subsidy mechanism in the energy sector is another concern. Industrial consumers are disproportionately bearing the cost, paying an estimated Rs. 244 billion for FY2023-24 in cross-subsidy.
FPCCI Regional Chief said that the financial arrangements and contracts of the Independent Power Producers (IPPs) need to be revisited. The high capacity charges are a significant financial strain. “We propose that the government renegotiate these agreements to extend debt repayment periods, which would provide some relief to the energy sector and the consumers.”
He stressed that Pakistan’s retail sector has witnessed exponential growth in recent years, fueled by a combination of factors including robust economic policies, technological advancements, and a burgeoning middle class with an increasing purchasing power. Hence, the sector should now be documented and additional sales tax should be collected at retail/final stage.
