Businessmen question rationale behind high power tariff

LAHORE: Businessmen are questioning the rationale behind high power tariff, as the power tariff for industry was US 9.8 cents per unit in 2012 when the price of crude oil rate was $112 per barrel and is 14.4 cents in 2015 when the price of crude oil hovers around $56 per barrel, experts said on Wednesday.
The government and the Prime Minister claim that power tariff has been reduced by over Rs4 after reduction in crude oil prices. However, they pointed out that additional duties and surcharges of around Rs4.5 per units have been slapped on electricity bills for all consumers to nullify the technical decline in tariff.
“For a consumer, it is the actual bill that he pays matter and technical reduction in rates neutralized by equivalent or more additional levies mean that the consumers get no relief,” they added.
Group leader All Pakistan Textile Mills Association (APTMA) Gohar Ejaz said when the present government assumed power in 2013 the average crude oil price was $109 per barrel and dollar was available at Rs106. The previous regime did not pass the increased crude oil price to the consumers, which had increased from $62 per barrel in 2010 to $112 per barrel in 2012.
However, the government after assuming power in 2013 increased the power rates immediately, thus catalysing industry’s protest. He said in 2014, the crude oil rate averaged $100 per barrel and the rupee appreciated against dollar, “still, the government increased the power tariff to Rs 15 per unit.”
“Now, in 2015, the crude oil is averaging $56 per barrel and dollar is being traded at Rs101,” he said, adding that this calls for massive decline in power tariff.
The Prime Minister in his address pointed out that the power rates have been substantially reduced. However, for industries, the consumers still have to pay higher for their power bills.
“This is not fair as the industries have to compete internationally,” he said.
With energy prices declining the world over, the power tariff needs to be adjusted accordingly. Since, Pakistan is one of the few countries producing substantial portion of power from Furnace oil, its power tariff has always been higher then rest of the competing economies.
Another power sector expert Mian Fazal said since 37 percent of the power in Pakistan is produced through engines running on furnace oil; the power cost in Pakistan remained high for more than two decades. Furnace oil, he added, during that period was costlier than hydro electric, gas or coal fired power generation. The situation has dramatically changed now, as the cost of fuel of all independent power producers stands at Rs 8 per unit, which is equivalent to the cost of coal fired power generation and lower than LNG.
Furnace oil rates have dropped from Rs 85,000 per ton to Rs 45,000 per ton, he said. After accounting for maintenance charges and the profits of IPPs the government buys power from IPPs at Rs11 per unit. The IPPs on average supply 5000 MW to the National Transmission and Distribution Company, he said.
Pakistan produces around 2000 MW, which is produced from gas that costs the government Rs 8 per units after accounting for all expenses. He said 6700 MW being currently generated through hydro power costs Rs 2.76 per unit. He said 600 MW nuclear power is purchased at Rs7 per unit.
He said around 400 MW power comes from Wind and Solar energy at Rs13 per unit and 1000-1500 MW is supplied by the public sector power companies at Rs 16 per unit. The average cost is than brought to around Rs 7, he said.
Chairman APTMA S M Tanveer said the gas infrastructure development cess would further inflate the energy bill of all industries. He said exporting industries are paying many non-refundable local and federal taxes against global norms as exports are zero rated.
He said numerous spinners have not restarted production even after five days of Eid holidays. This is abnormal as spinners operate 24/7 and do not close on even Eid holidays. He said around 100 spinning mills are under immense pressure and many have defaulted on their loans, utility bills, bank loans and even on salaries of their workers.