Power tariff hike jolts business circles

Traders say it will jack up business cost, open floodgates of inflation

KARACHI:

The business community in Karachi has expressed concern over the hike in electricity base tariff at the behest of the International Monetary Fund (IMF).

“We totally reject the unlawful increase in electricity base tariff by Rs7.90 per unit announced by the National Electric Power Regulatory Authority (Nepra),” said Karachi Chamber of Commerce and Industry (KCCI) President Muhammad Idrees in a statement on Thursday.

“It will prove detrimental to the industries due to high cost of doing business and will also open the floodgates of inflation,” he said.

In addition to making the electricity bills costlier and unaffordable for the consumers, the hike in base tariff would escalate prices of all household goods being widely used in every household, he added.

The KCCI president termed the increase in base tariff unlawful and a violation of Nepra’s rules and regulations.

Any increase in tariff has to be determined and implemented only after holding public hearings but unfortunately they have solely decided to raise the tariff without holding public hearings, he argued.

Topline Securities’ senior research analyst Sunny Kumar told The Express Tribune that the tariff had been approved by Nepra but “it is yet to be approved by the ECC followed by the cabinet.”

“I don’t think the government will approve a sudden jump in electricity prices,” said the energy sector analyst. “Maybe it will increase the tariff in phases.”

Idrees stated that the hike would raise the base tariff to Rs24.41 per unit from the existing Rs16.51 per unit, which would not only put the survival of industries at stake but would make the life of poor man miserable.

Electricity consumers are already paying an additional amount in the range of Rs4 to Rs6 per unit on account of fuel cost adjustment due to the unprecedented rise in fuel prices in the international market.

“Further addition to the base tariff will turn the finished goods uncompetitive in international markets and unaffordable in local markets,” he said.

“The economy and businesses will only flourish when the cost of doing business is brought down by substantially reducing the electricity, gas and water tariffs.”

On the other hand, K-Electric has announced that it is not being provided with natural gas and being forced to generate electricity through RLNG, which is 5.5 times more expensive than the local natural gas.

Local gas costs Rs857 per mmbtu while the imported LNG costs Rs4,700 per mmbtu. Therefore, the consumers in Karachi will have to bear double burden.

Employers Federation of Pakistan President Ismail Suttar asked “why is Karachi being targeted for the gas price?” After the 18th Amendment, it was decided that the province producing the most gas would get the first right to consume at base prices, he said.

Balochistan produces 22% and consumes 7% whereas Sindh produces over 60%, therefore, both provinces should pay the base price for the local gas.

“Pakistan is the only country which is wasting gas by consuming it in the domestic sector unlike anywhere else in the world,” he said.

Korangi Association of Trade and Industry (KATI) President Salman Aslam expressed concern over the provision of oil and expensive RLNG to power plants for industrial and residential consumers in Karachi.

He said that supplying RLNG at Rs4,700 per mmbtu instead of natural gas at Rs857 per unit would make electricity unaffordable for all consumers.

Published in The Express Tribune, June 3^rd, 2022.

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