Karachi, February 21, 2024 – The Federation of Pakistan Chambers of Commerce and Industry (FPCCI) has taken a strong stance, demanding the government to promptly implement a lower electricity tariff for industries.
The acting president of FPCCI, Saquib Fayyaz Magoon, emphasized the urgency of this demand, highlighting the severe financial strain faced by industries, particularly in the SMEs sector, which risks collapse and shutdown due to unsustainable business costs.
Magoon asserted that the unprecedented cost of doing business, primarily driven by soaring electricity and gas prices, has rendered Pakistani exporters highly uncompetitive in international markets. The acting president of FPCCI unequivocally called for the immediate implementation of the government’s announced 9 cents per kWh power tariff, pointing out that the current rate of 17 cents per kWh puts Pakistani industries at a significant disadvantage compared to regional competitors.
Explaining the reasons behind the urgent call for a lower electricity tariff, Magoon revealed that the power purchase price has surged by 95.82% since July 2018, primarily due to the higher capacity component in the power tariff. With a 10% reduction in power generation last year, the per-unit capacity component rose, resulting in an estimated cross-subsidy burden of PKR 244 billion for industrial consumers in the fiscal year 2023-24. Magoon stressed the need to end cross-subsidization to protect the trade and industry, considering it unfair and economically unsound.
In addition to electricity concerns, Magoon addressed the recent increase in gas prices approved by the federal cabinet, with residential users facing up to a 67% hike and fertilizer plants seeing a staggering 700% increase. The expected impact on food inflation due to higher gas tariffs for fertilizer plants added to the urgency of addressing the issue.
The acting FPCCI chief further demanded the allowance of net metering on all solar systems above 1 kW to encourage domestic and industrial consumers to generate their electricity at a potentially lower cost of 4 cents per kWh. Magoon stressed the necessity for a clear and comprehensive solar policy from the government to facilitate this transition.
Asif Inam, VP FPCCI & Chairman APTMA, expressed concerns about the existing disparity between the installed generation capacity of 47,000 megawatts and the transmission & distribution capacity of 28,000 megawatts. Independent power producers (IPPs) operating on a take-or-pay basis were identified as a significant financial burden on consumers across households, commercial, and industrial sectors.
Inam questioned the need for an additional 17,000 megawatt generation capacity when industrial consumption has declined by 25% due to unaffordable power tariffs. The surplus capacity raised concerns about the sustainability of not only export-oriented industries but also domestic production, potentially leading to an increase in imports.
Adeel Siddiqui, former VP FPCCI & President Hyderabad Chamber of Commerce & Industry (HCCI), highlighted the untapped potential of the 55,000 MW wind power corridor. Siddiqui criticized fuel adjustment charges as a tool to further burden regular electricity consumers and shared that 80% of the bangles industry has shut down due to the inability to afford electricity costs.
In conclusion, FPCCI’s urgent call for a lower electricity tariff underscores the critical need for immediate government intervention to rescue struggling industries and ensure the sustainability of Pakistan’s economic sectors.
