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‘Fuel adjustment not 15, but 100% increase’

* Industrialists ready to sell 2,500 MWs but govt not willing to purchase at rates equal to IPPs

By Irfan Aligi

KARACHI: While KESC claims that fuel adjustment charges have gone up by a mere 15 percent, the real increase is between 85 and 100 percent, claimed SITE Association of Industries Chairman Nisar Sheikhani, who went on to say that the utility has been claiming fuel adjustment charges since February and has actually recovered the increase in fuel cost from the March utility bills.

He said that gas fields have already increased charges by 70 percent and the new prices, which will be applicable from July, will be Rs 90 more per MMBTU, an increase of about 36 percent. Fuel adjustment charges by the KESC, following this increase in gas prices, will be between 130 and 140 percent, said Sheikhani, and the industry will not be able to sustain such increases in both sectors together.

Industrial units are on the verge of shutdown and, currently, one textile processing and export unit has shut down, as have several weaving units in SITE. The industry will collapse and unemployment rates will be unprecedented, he warned.

Federation of Pakistan Chambers of Commerce and Industry (FPCCI) President Tanveer Sheikh said that the textile and sugar industries in the country have the potential to produce at least 2,500 MW of electricity, and both industries are willing to sell the power they produce to the government. However, the government is not willing to purchase power from these industries at the rate equal to that being paid to independent power producers. If the government is ready to buy the power from these two industries, the current energy crisis will be half solved, he said.

In a statement issued Tuesday, Sheikh said that the increase in fuel adjustment charges escalates the cost of production for the industrial sector, which will leave a bad impact on the economy.

The profit margin of these industries does not increase beyond three to six percent. High electricity costs will add to production costs, curtailing the local industry’s capability to compete in the international market.

The large-scale manufacturing sector, which has been growing at an average rate of eight percent, constitutes around 40 percent of total electricity consumption in Pakistan. The Consumer Price Index (CPI) will naturally go up following the increases in energy prices. The inflation rate will also rise causing more unrest in the society. The actual problem is the energy crisis in the country, while power demand grows by six percent.

Presently, Pakistan meets 75 percent of its energy requirements domestically, but the increased gap between the demand and supply of energy remains a challenge. It is imperative to explore cheap and renewable energy sources so as to support industries and allow them to operate competitively. The survival of industries must be ensured so that the energy and economic crises can be overcome.

The higher authorities in the country must intervene and take action to rectify these issues, as their decisions may create many problems for the export industry, the business community and the general public, Sheikh said.

On the other hand, the KESC claimed that it has no authority to increase prices. The utility added that it had no knowledge of how and when the federal government increased the power tariff.

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