Business community in the provincial capital has strongly criticised the proposals given by the National Electric Power Regulatory Authority (NEPRA) and Oil and Gas Regularly Authority (OGRA) to increase electricity and gas tariffs simultaneously by 10 percent and 3.5 percent respectively.
Business and industry leaders from a number of trade bodies, including the Lahore Chamber of Commerce and Industry (LCCI), Pakistan Steel Re-rolling Mills Association (PSRMA) and Pakistan Industrial and Traders Associations Front (PIAF), have highlighted that a simultaneous rise in electricity and gas tariffs would cause a massive closure of industrial units owing to energy being one of the major industrial inputs.
LCCI Senior Vice President Sheikh Muhammad Arshad said that although under IMF commitment the government was bound to increase energy tariffs, problems of the business community should be considered as well. He said that both electricity and gas were major inputs in manufacturing and if the government escalates their tariffs, domestic industries would lose on their competitiveness.
Citing the example of the export oriented textile sector, Arshad stated that during the ginning, spinning and weaving processes, the electricity costs possess a three percent, 10 percent and 12-13 percent weight in production costs, respectively. Similarly, in the dyeing process, electricity has a share of over 30 percent in the processing costs. He further added that the domestic export industry is competing on a mere one or two percent margin with regional competitors in international markets.
If the domestic manufacturing cost increased by three to four percent, Pakistani products would be less competitive internationally, resulting in massive industrial closure and unemployment. He also indicated that local businessmen are being charged the highest mark-up rate of 18 percent for financing. Owing to electricity and gas load-shedding, industrial production has come down to 50 percent, which means that domestic industry is virtually paying a 36 percent mark-up as it was hardly producing even half of what it could using the available resources.
He urged the government to plug loopholes in the energy sector, curtail losses and keep a check on theft of both electricity and gas. Speaking to Pakistan Today, PIAF former Chairman Irfan Qaiser Sheikh said that owing to long hours of electricity load-shedding, the industry is already passing through trying times as it faces a difficulty in meeting buyers’ commitments and order deadlines. A further increase in power tariff would compromise manufacturing viability of the country to a great extent and no industry could survive that way. He said that the increase in tariffs was meant to meet revenue targets of utility companies, but it would have serious implications on the industry and economy.
Former PSRMA chairman Asmat Pervaiz commented that gas and electricity are considered essential raw materials for the steel industry. He underlined that development activity was already stagnant in the economy and a further increase in the steel input prices would drastically affect the production of steel products. He further drew attention to the energy shortage due to which the industry was compelled to run their units on furnace oil with increased manufacturing cost.
Pervaiz believed that all steel prices would jump up by Rs1,200-1,300 per tonne if energy tariffs were increased.
