FPCCI says industrial power tariff must fall below 9 cents for all to boost exports

Atif Ikram Sheikh, the FPCCI president, acknowledged the government's reduction of industrial electricity tariffs from 16 cents to 12 cents per unit over the past two years. Sheikh argued that a further decrease to below 9 cents, applicable to all industrial consumers, would stimulate exports and decrease imports. In a statement released on Saturday, Sheikh emphasized that the existing 12-cent rate and selective schemes are merely temporary solutions and that a uniform reduction across all industries, including B3 and B4, is necessary to boost exports and reduce imports.

Sheikh praised Prime Minister Muhammad Shehbaz Sharif and Federal Minister for Power Sardar Awais Ahmad Khan Leghari for the relief provided to industries. He also recognized the minister's efforts to implement two measures for industrial demand: an Incremental Consumption Package and an Optional Two-Part Time-of-Use Tariff. Sheikh explained that the Incremental Consumption Package provides a discounted rate for electricity consumed beyond a consumer's baseline – the previous consumption level.

Existing load continues to be charged at the regular rate, and the incentive only applies to the additional units. The Two-Part ToU Tariff divides the bill into a fixed capacity charge per kW per month and a variable charge per unit, with separate rates for non-solar, solar, and peak hours. The tariff aims to encourage industries to utilize more electricity during the day when solar generation is abundant, thereby alleviating the evening peak.

Sheikh expressed concerns about the high fixed charges and the infeasibility of the tariff in the current logistics situation affected by the war. He suggested that the benefit to one industry should be borne by all consumers, making the gain of one industry a burden for another. Sheikh noted that industries have already optimized their electricity consumption around daytime and solar hours, leaving limited flexibility to shift demand from night to day.

Even at the proposed solar-hour rates, solar power remains cheaper than grid supply when considering all factors. Consequently, the tariff would not bring industries back to the grid during solar hours or resolve the duck curve. Sheikh urged that industry's input should be considered during the design stage of future proposals. He clarified that B3 and B4 consumers still bear a cross-subsidy, despite their higher voltage usage and lower cost to serve.

Reducing their tariff alongside the rest of the industry would benefit both consumers and the electrical system. Sheikh concluded by stating that the International Monetary Fund (IMF) would likely support the reduction of the industrial tariff, as it would enhance industrial output and exports.