Mounting electricity prices strain Pakistani households, businesses: FPCCI President

In a press conference held in Lahore, Irfan Iqbal Sheikh, President of the Federation of Pakistan Chambers of Commerce and Industry (FPCCI), voiced deep concerns over the escalating electricity prices in Pakistan. Sheikh highlighted the distressing impact of the National Electric Power Regulatory Authority’s (NEPRA) forecast for power purchase prices in the upcoming fiscal year 2023-24.

He said that NEPRA’s forecast revealed a significant financial burden on both households and businesses, with consumers expected to bear a staggering 68 percent of the fixed capacity payment costs.  Sheikh highlighted the potential economic instability posed by the substantial fuel costs, particularly those associated with petroleum imports.

He expressed worries about the volatility these costs could introduce and the strain they could place on Pakistan’s foreign exchange reserves. Moreover, Sheikh lamented the lack of a clear solution or comprehensive governmental strategy to address these pressing issues.

“To counter these challenges, the government has already increased the consumer-end tariff, effective from July 1, 2023. This move would have adverse effects on both residential and commercial consumers, especially given the existing burden of inflation on businesses, rendering them unprofitable and at risk of bankruptcy,” he said.

One of the most concerning aspects highlighted by Sheikh was the current inability of residential consumers across the country to pay their electricity bills.

“On average, consumers are already burdened with paying an additional 15 to 20 percent in the form of various charges, including uniform quarterly adjustments, fuel price adjustments, and surcharges. The added costs don’t stop there for consumers. On top of these charges, residential users are subject to an extra 20 to 25 percent in the form of electricity duty, sales tax, and income tax. The disparity between the charges and the consumers’ ability to pay is evident in the figures: off-peak load consumers are paying Rs. 35.57 per kWh, while peak load consumers are shelling out Rs. 41.89 per kWh. These numbers exclude additional charges like taxes, fuel cost adjustments, uniform quarterly adjustments, and surcharges. Commercial consumers are also facing the brunt of these price hikes, coupled with additional taxes and duties. In the current billing scenario, commercial users are paying a staggering 37 to 40 percent of their total electricity charges in the form of taxes and duties,” he added.

Sheikh proposed several steps to alleviate this crisis. He called for a reduction in operational costs for power distribution companies, including withdrawing the provision of free electricity to WAPDA employees, addressing transmission and distribution losses, and tackling electricity theft. He also suggested renegotiating debt payment periods with power plants to reduce the capacity component in the power tariff.

Highlighting the gravity of the situation, Sheikh stressed that businesses cannot sustain themselves with unaffordable electricity costs. He cautioned that the economic growth of the nation is at risk, and many small and medium enterprises could be forced to shut down.