LAHORE - The announcement of reduction in electricity tariff by Rs2:32 per unit is a positive step, bringing the average electricity tariff to Rs11:50 per unit for industry, but it does not suit the industry to compete regionally, as average electricity tariff in the region is not more than 8 cent. The industry stakeholders questioned that how Pakistan’s cement and other industries can survive by paying more than 8 cent.
They said that the latest notification of electricity tariff for Punjab industry stipulates Rs12.50 per unit for off peak and Rs18:80 per unit during peak hours. This is a huge challenge for our industry to compete in the Industrial Marketplace, they added.
Presently, electricity charges accounts for 18%-28% of the total manufacturing costs for the cement companies, depending upon power mix and plants efficiencies. With an average national grid
tariff for cement companies at around Rs85/KwH (adjusting for Peak hours, Non-Peak hours and Fuel Adjustment Surcharges), Rs2.32/KwH cut translates into about16% cut in tariff.
According to experts, cement manufacturers with heavy dependence on grid based electricity are expected to be the prime beneficiary of the reduction in power tariffs by 16%. This is expected to add on the strong margins of the industry, especially for the second tier manufacturers. As per calculations FCCL, PIOC, LPCL, KOHC and FECTC (having no captive capacities) are expected to experience a 10% annualized growth in earnings as a consequence of the development. At the same time, manufacturers with captive capacities but some reliance on grid imports such as DGKC and MLCF are expected to witness an earnings impact of 2.2% and 4.1%, respectively.
They said that textile sector is going to be another beneficiary of this cut in power tariff with the companies having the highest reliance on national grid being the biggest beneficiaries.
APTMA Chairman SM Tanveer said that the Punjab textile industry is already facing problem due to inter-province tariff difference, especially when the industry is passing through unprecedented energy shortage since 2007.
Chairman APTMA said the facility of GSP plus from the EU demands a level playing field for Pakistan’s textile industry. According to him, the industry was likely to suffer from a colossal loss of $5 billion exports in next three months in case no competitive environment is ensured by the government. He said availability as well as affordability of energy to the sector would also bring a billion dollar investment per annum that would generate more employment and exports to the country. He urged the Prime Minister of Pakistan to announce special industry tariff to enable it to compete regionally without any further delay.