Rs3 a unit cut in power tariff for industry notified

 Reduced tariff to take effect from Jan 1

ISLAMABAD: The Ministry of Water and Power has formally notified tariff reduction of Rs3 a unit for industrial sector what Prime Minister Nawaz Sharif had announced at the end of December last year. 

This move has been taken in an effort to boost Pakistani exports and make its products more competitive on the international market. The ministry has instructed all distribution companies (discos) and K-Electric that payment from industrial consumers shall be received under the reduced tariff with effect from January 1, 2016.  

Currently, the industrial sector is charged with an average tariff of more than Rs14 per unit, which has higher peak rates and lower off-peak rates. After reduction in the base tariff, all the current rates will lower by an average of Rs3 per unit with an average tariff of around Rs11 per unit.

A senior official of the ministry said: “The current reduction in electricity tariff, which is the main input for the value added export oriented products, will help boost exports and make them more attractive to the foreign consumers.”

The government has taken this decision on the demand of industrial sector, as in other competing economies including India, Sri Lanka and Bangladesh the cost of this major input was much lower than in Pakistan. 

This huge difference made manufacture of value-added textiles and leather – the two prime exports of Pakistan — less competitive compared to regional competing countries. According to estimates, the cost of electricity for export-oriented industrial sector in Pakistan is around 86 percent higher than Sri Lanka and more than 45 percent higher than India and Bangladesh.

In Pakistan, per unit cost of electricity is 14 cents, 7.3 cents in Bangladesh, 8.5 cents in China and 9 cents in India. Pakistan’s total exports during July-December 2015/16 witnessed a decline of 14.4 percent to $10.322 billion against $12.058 billion in same period last year. 

In these six months, textile exports dipped by 8.93 percent to $6.27 billion against $6.88 billion in the same period last year. During this period, the country has suffered a loss of around Rs60 billion in textile export earnings and approximately 60,000 employees have lost their jobs, traders said.

From January to December 2015, Pakistan leather sector registered a decline of 20 percent in its exports, while other countries experienced increase in their exports in the sector, as Chine leather exports up by four percent, India 18 percent and Bangladesh registered growth of 32 percent in leather exports.