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ISLAMABAD: Pakistan Association of Large Steel Producers (PALSP) has requested Finance Minister Shaukat Tarin to issue a notification for an extension in the incremental electricity consumption package approved by the Economic Coordination Committee (ECC).

According to a communication of the PALSP to the finance minister on Monday, the steel sector is highly dependent on electricity as 15 percent of the total cost for producing steel is the cost of electricity.

Pakistan is paying a huge amount to the Independent Power Producers (IPPs) as capacity charges, which has become a threatening challenge for the country.

The government can offer the surplus capacity to the steel sector at lower rates in order to bring the cost of producing steel down.

Pakistan hit an all-time high-power production level in August 2021 and with the surplus power production capacity available in the country.

The excessive installed capacity is causing rise in the circular debt and the government is paying billions of rupees in the form of annual capacity payments to the IPPs.

Government can utilise this surplus capacity by facilitating domestic steel industry with subsidised electricity prices like it is already providing to some other sectors.

Cheap electricity is imperative for the survival of steel industry because it is totally reliant on electricity, whereas, on ground energy tariffs in Pakistan are the highest in the region and domestic steel industry is jeopardised by the high electricity prices.

Industrial unit effective price in Pakistan ranges between 12.28¢/kwh -16.14¢/kwh, whereas, in Vietnam (7.3¢/kwh), India (7.1¢/kwh and 7.8¢/kwh in Maharashtra and Punjab, respectively), and at 6.1¢/kwh in Xinjiang, China.

The industry believes that the government is making every possible effort to boost the local industry as well as the economy.

For this, the ECC of the Cabinet approved the extension of incremental consumption package (Case No ECC-310/27/2021 dated August 16, 2021).

However, no notification has been issued so far for continuation of this package.

If the situation continues and no notification is issued for the extension of the package, the cost will further increase and situation will get worse.

In order to bring the steel industry out of the current situation, the government must facilitate steel sector with the same facility that is provided to other export-oriented sectors such as textile etc.

This may also be mentioned here that already in October, the prices of electricity are going to increase as per government prior notification to increase electricity rates by PKR 2.97 per unit in October 2021 all over Pakistan that will cause increase in cost of steel by approximately Rs4,000/ton.

We believe that the government is doing its best to support the industry and we hope it will consider our proposal of providing electricity at lower rates. Also, it is requested to issue the notification for the extension of the electricity package at the earliest and extend the facilities provided to other sectors to the struggling steel industry as well, which is the backbone of the economy, it added.

Copyright Business Recorder, 2021

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