Power tariff raise to have serious concerns for industrial sector: Bengali

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Wednesday, August 07, 2013 - KarachióDr Kaiser Bengali, eminent economist of Pakistan strongly deplored the drastic increase in electricity rates for industry and termed it as a death blow for the manufacturing sector; with serious implications for exports and employment.

There were expectations from the new government of a more professional approach to economic management, but the measures taken so far have been deeply disappointing.

The first major disappointment was the federal budget for the year 20013-14, which raised the general sales tax (GST) rate on goods by one percentage point, he said adding that the manufacturing sector is already suffering from high cost of production and has, over the years, been placed in a disadvantageous position relative to other sectors. The GST rate increase has burdened the manufacturing sector further and the power cost rise will force many units to shut down.

Admittedly, it is not feasible for the government to continue to supply electricity at less than the cost of generation. However, the per consumer cost of electricity generation is high for paying consumer because of non-payment of electricity bills by institutional and individual consumers. The government has imposed the cost of non-payers on the payers, instead of improving the governance machinery to reduce, if not eliminate, free use of electricity, he commented.

Even if there is a genuine need to raise electricity tariff, the increase needs to be part of an overall economic package that promotes industrial growth, which is the engine for exports and employment. That economic plan or vision appears to be completely lacking, said Dr Bengali.

He demanded that if power tariffs have to be raised, the industrial sector should be provided compensatory relief on the tax front and proposed that the GST rate for goods be reduced to 15% for the current year and progressively to 5% over the next 5 years.

He has also suggested that the VAT mode be abandoned and at a flat 5% GST rate, the regime for adjustments and refunds should also be done away with, so as to liberate industrial enterprises from the burden of maintaining an elaborate accounting system and from subjecting themselves harassment by tax authorities.

Courtesy: †Pak Observer

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