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Business & Finance

Business community irked over ‘mounting’ power prices

  • Criticises Discos for line losses, and imposition of high capacity charges on consumers
Published August 29, 2023

As protests over exorbitant power tariffs in Pakistan refuse to die down, the business community on Tuesday heavily criticised distribution companies (Discos) for not curbing line losses - one of the causes that contribute to increase in electricity rates.

Businesses also showed dismay over imposition of high capacity charges on consumers.

Pakistan’s apex trade body the Federation of Pakistan Chamber of Commerce and Industry (FPCCI) held an emergent press conference on higher electricity tariffs. FPCCI and other association’s officials attended simultaneously from Lahore, Karachi, Islamabad, Peshawar, and Quetta via video link.

“Pakistani households and businesses are facing mounting power prices,” said Lahore based Irfan Iqbal Sheikh, President FPCCI.

“NEPRA’s latest forecast for power purchase prices for the fiscal year 2023-24 reveals a substantial financial burden, with consumers to bear 68% of costs for fixed capacity payments; primarily benefiting coal plants,” he said.

Hike in power prices has recently trigged protests across the country, with political parties and business communities joining hands with the protestors. The interim government is mired in indecisiveness as increase in electricity prices is in line with commitments made to the International Monetary Fund (IMF).

Sheikh was of the view that substantial fuel costs, particularly petroleum imports, potentially pose extreme volatility and strain on foreign exchange reserves - with no clear solution or governmental strategy in sight.

“As a result, consumer-end tariff has been increased and applicable with effect from July 1, 2023.”

He stressed that a better and more viable option should be explored to meet IMF’s requirement to curb circular debt and provide affordable electricity to consumers.

“The immediate solution to reduce the power tariff is to reduce the operational costs of all power distribution companies, i.e. withdraw the provision of free electricity to WAPDA employees; reduce transmission & distribution (T&D) losses, and eliminate electricity theft,” he said.

KE incurred less line losses: Nepra chief says performance of all Discos dismal

FPCCI and other association officials vociferously rejected the recent hike in electricity prices.

“We reject this increase in electricity prices as it is debilitating both for residential and commercial consumers when inflation is already killing the businesses and rendering them unprofitable and bankrupt.”

Sukkur Chamber of Commerce and Industry President Bilal Waqar Khan said 35% of the Sukkur businesses have shut down and the rest are “badly struggling”.

The increase in electricity tariff would bring people on the road, he feared.

Rehan Jawed, chairman of Korangi Association of Trade and Industry’s (KATI) Nepra and Ogra committee, said the main issue is capacity charge and theft.

“Capacity charges can be overcome by increasing consumption, which can be achieved by reducing overall industrial unit price,” he told Business Recorder.

Net effect would be lower inflation, a stable round the year base-load, higher exports, and lower imports, he envisaged. “It will be a win-win situation for all.”

“From the back-end, we need to understand that power plants are on capacity charge basis and dollarised returns. RLNG is take or pay. When they are mixed together is the reason for this chaos,” he explained.

He emphasised that industrial unit price should be lowered to a point where it sets off the capacity charges.

“Let us not forget that there is a 20,000 megawatts difference in summer and winter months. Only a stable industrial load can sail us through this mess.

“None of the above proposals are difficult decisions and the IMF won’t mind either. They are only concerned when there is subsidy involved. In fact, if you read the last review report, WACOG (weighted average cost of gas) was proposed by the IMF itself.”

The KATI official urged the government to reduce the rate up to 300 units to protected consumers so they do not resort towards theft.

“If things are not addressed, 35% of the residential consumers will not be able to pay their bills. Residential consumers make 60% of the total electricity user,” he said.

Meanwhile, FPCCI chief further stated that residential consumers are unable to pay their electricity bills.

“On an average, residential and commercial consumers pay 15-20% extra in the form of uniform quarterly adjustment; fuel price adjustments and additional surcharges.

Residential consumers pay an extra 20-25% in the form of electricity duty, sales tax, and income tax. Residential consumers are subjected to pay Rs35.57 per kWh for off-peak load and Rs41.89 per kWh for peak load. These charges exclude taxes, fuel cost adjustments, uniform quarterly adjustments, and additional surcharges, according to Sheikh.

“Commercial consumers are also subject to further tax and extra tax in addition to electricity duty, sales tax and income tax. In current bills, commercial consumers are paying 37-40% of the total electricity charges in taxes and duties,” he said.

FPCCI chief explained that a commercial consumer with electricity consumption of 5000 kWh is subject to pay a hefty Rs381,785 rupees in electricity bill. “It is astonishing to note that around Rs135,994 rupees will go into the government pockets in the form of taxes and duties not including additional surcharge and fuel cost adjustment.”

Sheikh asked the government to negotiate with power plants to increase the debt payment period to reduce the capacity component in the power tariff.

“We urge the government to halt the imposition of sales tax for 6 to 8 months in order to reduce the cost of doing business,” he said, adding that businesses could not survive with provision of unaffordable electricity.

“Economic growth will be jeopardised and many small and medium enterprises will shut down,” Sheikh maintained.

Comments

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KU Aug 30, 2023 12:18pm
Too late to get irked, the farmers have been faced with this increase in electricity cost for the last couple of years and many have reduced their cultivation area to remain feasible, but other high costs of production are now ensuring the complete discontinuation of agriculture in Pakistan.
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Tariq Qurashi Aug 30, 2023 03:36pm
I know someone who runs a large factory that has installed solar panels all over the factory roof. This has brought down his electricity bill considerably. Even small and medium enterprises should look into this option.
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