KCCI Rejects Approval Allowing FCA Hike to K-Electric

KCCI Rejects Approval Allowing FCA Hike to K-Electric

Karachi, July 5, 2023 – The Karachi Chamber of Commerce and Industry (KCCI) Wednesday recently rejected the approval to allow K-Electric, the sole electricity provider in Karachi, to increase the Fuel Cost Adjustment (FCA).

KCCI President Mohammed Tariq Yousuf expressed deep concern over the decision made by NEPRA, the regulatory authority, to approve a rise in the FCA by Rs1.495 per unit for K-Electric.

President Yousuf raised the alarm over the government’s consideration of raising electricity base tariffs by Rs4 to Rs5 per unit, as part of the International Monetary Fund’s (IMF) agreement. The combined increase in electricity costs could have severe implications for businesses and the economy, dealing a significant blow to exports and local production.

Highlighting the double increase in electricity costs faced by the public, President Yousuf stressed that burdening the industry and the masses through the separate application of the FCA and the IMF’s agreement was unjustifiable. While acknowledging the government’s commitment to meeting its obligations to the IMF, he urged against overburdening the industry and the public by raising the FCA, which is unrelated to the IMF’s agreement.

President Yousuf warned that the substantial increase in electricity base tariffs would further deteriorate the already struggling business environment and have a detrimental impact on exports. The high production costs resulting from increased electricity tariffs could potentially exclude Pakistani exporters from the international market. Currently, electricity consumers are already paying a significant tariff, including the FCA, quarterly adjustments, surcharges, and taxes, amounting to approximately Rs50 per unit. Concerns are now mounting that this figure may rise to Rs65 to Rs70 per unit as electricity tariffs continue to escalate frequently.

In addition, President Yousuf criticized K-Electric for its failure to generate cheaper electricity, thereby imposing an additional burden on consumers. He called upon the government to incentivize K-Electric to prioritize renewable energy sources as a means to alleviate the monthly burden of the FCA on consumers.

Furthermore, the KCCI has been actively advocating for the end of K-Electric’s monopoly in Karachi by introducing four to five more players in the power generation and distribution network. According to President Yousuf, this initiative would provide relief to consumers by offering them the option to choose the most efficient and cost-effective electricity provider. He appealed to the government to promptly address these concerns before the situation worsens.

With the rejection of the proposal to increase the FCA, the KCCI’s stance aligns with the interests of businesses and the public, emphasizing the need for a balanced and sustainable approach to managing electricity costs while safeguarding the economy’s growth and competitiveness.

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