ISLAMABAD , APRIL 11 : Pakistan Association of Large Steel Producers urge the Govt not to increase the cost of electricity for the steel sector which is already facing a crisis like situation.
The govt has made this announcement under the diktat of IMF to increase the cost of electricity by Rs 5.65 per unit before October this year and it will be 36% increase in the cost of electricity. Early this year, the Govt 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 govt. increased the energy tariffs by issuing SRO No. 192 dated 12th February 2021. By this SRO Rs. 1.95 / kwh was increased in variable charges and Rs. 40 / kw / month increase in fixed charges. The consumer suffers extra burden and pay heavy fixed charges for electricity connection. Where all cost of distribution system (grid, cable, substation, transformer etc.) has to be paid by consumer. If we compare with our neighboring 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.
Over the past two years, the steel industry has absorbed massive cost increases by reducing its profit margins to provide cost effective material to the construction sector despite Covid-19 lockdowns, massive currency depreciation, high interest rates, increase in electricity costs inflated the losses made by the steel industry.
This increase will not only hit the manufacturers but also consumers and govt will suffer as well. Because the higher steel prices could jeopardize the government’s plans to encourage the construction sector in general and housing in particular.
Govt. instead of reforming the energy sector is taking decisions which are detrimental to domestic industry. This Power tariff rise also nullifies the industrial package announced in November 2020. This will force steel industry to increase the steel prices and eventually affect the government public spending programs like Naya Pakistan housing project. It can adversely affect the economic revival plan as well.
PALSP demands to withdraw this disastrous plan of power tariff hike as a massive increase in cost of electricity bill will eventually overburden the already poverty-stricken end consumer.