Industrial power tariffs in Pakistan have soared to approximately 17 cents per kilowatt-hour (kWh), which is more than double the regional average. The power tariffs for the textile sectors in India stand at 6 cents/kWh, Bangladesh at 8.6 cents/kWh and Vietnam at 7.2 cents/kWh. The recent spike in gas prices, which reached Rs2,750 per million British thermal unit (mmBtu), reflects a substantial 223% increase since January 2023. Consequently, the cost of captive generation is set to rise from around 10 cents/kWh to 12.2 cents/kWh. This surpasses the regionally competitive level of 9 cents/kWh. Talking to WealthPK, Muhammad Aman, a member of All Pakistan Textile Mills Association (APTMA), said that the repercussions of elevated energy costs were evident in the decline of power consumption nationwide. In December 2023 alone, he said total power consumption plummeted by 8-10%, primarily fuelled by reductions in industrial and high-end domestic usage, which are major contributors to fixed costs in the power sector.

“This downward trend is mirrored in power generation figures, with a 9.8% year-on-year drop in November 2023 and a further 2.4% decline in January 2024,” he said, adding that APTMA members had experienced consistent declines in power consumption since October 2023, with a staggering 37% year-on-year drop. “In December 2023, the decline persisted at approximately 25% year-on-year.” Aman said that despite tariff hikes, the net impact on power sector revenue remained negative due to the volumetric decline in consumption. “Notably, circular debt continues to grow, emphasising the unsustainable nature of the current situation,” he highlighted. Meanwhile, speaking to WealthPK, an official of a textile mills said that the recent approval of Rs4.5/kWh by National Electric Power Regulatory Authority (Nepra) reflected the need to spread fixed costs over a diminishing pool of consumption.

“This, in turn, threatens to escalate the decline in power consumption and necessitates further tariff hikes, perpetuating a cycle with no apparent solution.” He emphasised that as the country grappled with underutilised capacity and a pipeline of 7,000MW in new projects over the next two years, the situation became increasingly untenable. “Unless addressed promptly, the sector faces the looming threat of tariffs reaching Rs100/kWh without a corresponding demand from consumers.” The textile miller advocated the removal of cross-subsidies from industrial tariffs and the restructuring of tariffs to incentivise consumption. “This strategic move should aim to stimulate industrial activity, revitalise power consumption and alleviate the burden of capacity payments on all consumer categories. The urgency for reform is palpable as the nation stands on the precipice of an unsustainable cycle of declining consumption and escalating tariffs.”

Credit: Independent News Pakistan (INP)