Flaws in discounted power tariff put some industries at stake

ISLAMABAD: The industrial power tariff relief package for incremental consumption that was extended by the PTI government on August 16, 2021, has pushed some industrial units, installed much before 2019-20, to the verge of collapse.

It is because these have become non-competitive because the same tariff i.e., Rs12.96 per unit, is being extended to new industrial units on their whole monthly consumption of electricity not on the incremental units as they have no reference year for the record of their routine consumption of the electricity in their preceding years.

The PTI government had set the reference year of 2019-20 for calculating the routine consumption of electricity for the industries. And under the package, as approved by the ECC of the Cabinet on August 16, 2021, during the PTI regime, the rate of Rs12.96 per unit is charged to industrial consumer categories (B1, B2, B3, B4, and B5) from July 1, 2021, to October 31, 2023, for off-peak incremental consumption basis over their consumption in corresponding months of March 2019 to February 2020. New industrial consumers having no reference consumption available in the period of March 2019 to February 2020 are being offered the same tariff through a slab-wise consumption structure, a senior official at the Energy Ministry told The News.

When contacted, Power Division responded that the department had received many complaints from some industrial units and was in process of gathering more data to this effect and would take action accordingly and do away with the distortions built-in within the industrial relief package on incremental use of electricity.

However, the factories, the official said, that came on stream in 2019-20 are getting electricity at Rs12.96 per unit, not for the incremental usage of electricity but for availing the same tariff in its total consumption.

“Which was why the other industries, having the record of routine consumption of electricity in the preceding year, first use the electricity units at a routine tariff of Rs23.49 during off-peak hours and Rs29.49 during peak hours as per units recorded in the same period of the previous year.”

These industries were liable to have an electricity tariff at Rs12.92 per unit under the relief package against the use of additional electricity which is also called incremental utilisation of electric power, the official added.

This has created a huge distortion in the tariff billing between two kinds of industries - the new ones, which are in operation since 2019-20 during the PTI regime and the old ones, which are operating before 2019-20. And because of this distortion in the tariff, the old industries are no longer competitive in the country’s market and they have no option but to close their operations.

“In the presence of this differential treatment under the garb of the tariff of Rs12.96 as per the relief package, we cannot run our businesses as the products being prepared by an industrial unit, launched in 2019-20, throw their products in the market at a reduced price as compared to our products that are manufactured with high input cost in shape of electricity at high average tariff,” Mohammad Rehan, a business tycoon from Gujranwala told The News.

He said his competitors which initiated production in 2019 were using the whole electricity at Rs12.93 per unit and they were not paying Rs12.96 per unit on incremental use as they had no record of the consumption of electricity in the previous year.

Rehan said that he was running its industrial unit, not at 100 percent capacity, but at 50 percent because of the average high tariff (tariff on routine consumption of electricity plus relief tariff of Rs12.96 on incremental units).

“The new units installed in 2019-20 are paying only a relief tariff at Rs12.96 on their whole electricity. This is why the old industrial units are getting abnormally high bills compared with the new ones.”

Rehan stressed that these flaws of differential treatment in the relief package be eliminated as soon as possible to ensure the level-playing field for both old and new industrial units. The PTI government had allured the industries to consume electricity at the maximum to utilise the excessive generation capacity of the country and offered a tariff of Rs12.96 per unit on incremental units.

The capacity payments stayed at Rs850 billion in the last fiscal, which has now surged to Rs1,400 billion in the current fiscal year. The industrial tariff was extended at a lower tariff of Rs12.93 per unit under the relief package on the incremental use of electricity.