FPCCI says industrial power tariff must fall below 9 cents for all to boost exports

Atif Ikram Sheikh, President of the Federation of Pakistan Chambers of Commerce & Industry (FPCCI), acknowledged the government’s reduction of the industrial electricity tariff from 16 cents to 12 cents per unit over the last two years. He said that a further reduction to below 9 cents, extended to all industrial consumers, is the way to raise exports and reduce imports.

In a statement released on Saturday, Sheikh cautioned that the 12-cent rate and selective schemes are temporary fixes, and that only a uniform reduction for all industry, including B3 and B4, can lift exports and cut imports.

Sheikh thanked Prime Minister Muhammad Shehbaz Sharif and Federal Minister for Power Sardar Awais Ahmad Khan Leghari for the relief.

He also acknowledged the minister’s effort to bring forward two measures for industrial demand: an Incremental Consumption Package and an Optional Two-Part ToU Tariff.

FPCCI chief said that the Incremental Consumption Package offers a concessional rate on electricity consumed above a consumer’s own baseline – which is its previous consumption.

Existing load is billed as before, and the incentive applies only to additional units.

The Two-Part ToU Tariff splits the bill into a fixed capacity charge per kW per month and a variable charge per unit that differs by time of use – with separate rates for non-solar, solar and peak hours. Its aim is to encourage industry to consume more during the day, when solar generation is abundant, and so ease the duck curve.

Sheikh stressed that the industry had put its reservations on the Two-Part ToU Tariff before the Power Division over the last six months – and maintained that the fixed charges were too high; and, with logistics disrupted by the war, the tariff was not workable for industry in present conditions.

FPCCI President recommended that a benefit to one industry would also be recovered from all consumers; so, the gain of one would become the burden for another.

Industry has already optimised around daytime and solar hours, which leaves little room to move demand from night to day; and, even at the proposed solar-hour rates, solar remains cheaper than grid supply across all calculations. The tariff would therefore neither bring industry back to the grid in solar hours nor resolve the duck curve. He hoped that industry’s input would be given due weight at the design stage of future proposals.

Sheikh explained that B3 and B4 consumers still carry a cross-subsidy, even though they take supply at higher voltage and cost less to serve. Their tariff can readily be reduced together with the rest of the industry to the benefit of both the consumers and the system.

He added that the IMF should have no problem with reducing the industrial tariff, since it raises industrial output and exports.