INP-WealthPk
Hike in Energy Prices Shocks Pakistan's Business Circles
June 08, 2022
By Muhammad Mudassar ISLAMABAD, Jun 08 (INP-WealthPK): The National Electric Power Regulatory Authority (NEPRA) has announced an increase of Rs7.9 per unit in the tariff, causing the base tariff to rise to Rs24 per unit for the FY2022-23, reports WealthPK. Moreover, the petrol price has also been increased by Rs30 per liter for the second time. With this massive hike, petrol now sells at Rs210 per liter. Gas prices have also been increased by 45 percent. The government took these steps to fulfil the IMF’s conditions. Delay in accepting the IMF conditions has created uncertainty in the country. The Rs7.9 hike in the power tariff is mainly due to the increase in fuel prices, capacity costs, and the impact of rupee devaluation. Capacity payments, including NTDC and HVDC costs, are projected at Rs1,366 billion. The total revenue requirement of all DISCOs, including DISCOs margin and Prior Year Adjustment (PYA), is projected at Rs2,805 billion with projected sales of 113,001GWh. MEPCO, GEPCO, HESCO, SEPCO, QESCO, PESCO & TESCO have been allowed an investment of around Rs406 billion for their five-year distribution investment program. The distribution companies’ Transmission and Distribution (T&D) losses have been reduced from 13.46% to 11.70% for the FY 2022-23. Industrialists, however, do not appreciate this major increase in the power tariff. President of Karachi Chamber of Commerce & Industry (KCCI) Muhammad Idrees has totally rejected the increase [in the power base tariff by Rs7.9 per unit] for the next budgetary year 2022-23. According to Idrees, the hike in power tariff would prove detrimental to the industries due to the high cost of doing business and would also open up yet another floodgate of inflation, because in addition to making the power costlier and unaffordable for consumers, the exorbitant hike in the base tariff would cause an increase in the prices of all essential household goods. Idrees said the rise in base tariff would also affect exports, making finished goods less competitive in the international markets and less affordable in the local markets. “It is true that the economy and businesses only flourish when the cost of doing business is brought down by substantially reducing the electricity, gas, and water tariffs,’’ he said. Since electricity is a major component of production, the business community strongly pleads against adding an otherwise avoidable burden of costlier electricity which is going to terribly affect the industrial activities, create problems for the public, and plunge the economy into more crises. Industries are the backbone of the economy and the government should facilitate sustainable exports. The government should give the industries subsidized energy-related inputs. The best option is to move towards renewable energy, as the country has tremendous potential for renewable energy sources.
