Steel producers plead for not increasing electricity tariff

ISLAMABAD: Pakistan Association of Large Steel Producers (PALSP) has urged the government not to increase the cost of electricity for the steel sector which is already facing a crisis-like situation.

In a statement issued here Sunday, they said the government has made this announcement under the order of the IMF to increase the cost of electricity by Rs5.65 per unit before October this year and it will be 36% increase in the cost of electricity. Early this year, the government had increased the cost of electricity by 16%.

This decision will have disastrous consequences for steel industry of the country in particular and the local steel industry in general. Steel is energy-intensive sector and one of the major consumers of electricity and this major increase in electricity cost will create crisis-like situation for the struggling steel sector.

In the month of February this year, the government increased the energy tariffs by issuing SRO no 192 on February 12, 2021. By this SRO Rs1.95/kwh was increased in variable charges and Rs40/kw/ month increase in fixed charges.

The consumer suffers extra burden and pays heavy fixed charges for electricity connection whereas cost of distribution system (grid, cable, substation, transformer etc) has to be paid by consumer.

If we compare with our neighbouring countries; in Bangladesh (DPDC) fixed charges are only 70.92 US cents for B4 customer whereas its 250 US cents (after recent increase) in Pakistan. In Pakistan, where already there is high cost of doing business, this decision will create more difficulty for manufacturer. With continuous rise in cost of inputs, the industry is underperforming since long time.

This increase will not only hit the manufacturers but also consumers and government will suffer as well. The higher steel prices could jeopardise government’s plans for encouraging construction sector in general and housing in particular.