As per industry sources report to SteelMint, Pakistan’s Government has indicated a hike in electricity tariffs by upto around 25% over the next few months period.
Power tariffs are expected to be brought from the existing average of PKR 12.98 per unit to PKR 16.24 per unit during next four months with the objective of bringing power-sector losses to zero from 1st of July’19 onwards. Participants indicate that this increase would be significant however, the exact date of its implementation is yet to be cleared at the moment.
“There is news of rising in electricity tariffs by average around PKR 1.5 per unit and this rise could extend for every month for next 3-4 months. Maybe by next week, it will come in action, however, there is uncertainty regarding its impact at the moment” shared officials from local steel mills.
What could be the expected impacts?
Local steel prices may increase - Increased electricity tariffs may result in increasing of local steel prices in Pakistan. However, recent World Bank’s report says that increasing electricity tariffs will not help solve the issues in the power sector in Pakistan. As per last reports, Bala billet prices assessed at PKR 74,300/MT and rebar selling price at around PKR 95,000-96,000/MT, ex-works in Punjab and Lahore inclusive of local taxes.
Public sector development projects execution turns skeptical - Many steelmakers are already getting affected by issues like holding up of several public sector development projects by the Government in Northern region and a lot of tax evasion being faced by the industry. Additionally, in the upcoming heating season, electricity consumers should be expecting another massive hike in the bills they pay for their power usage while by peak summer it will affect the economy further badly. This may put a question on the government’s stated plans of increasing economic investment in Pakistan.
Historically, Mar-Apr has been a very good period for the steel industry but it might not be as good as past years this time, shared an official from a renowned mill in Pakistan. Participants of a few other mills that SteelMint spoke shared that there is uncertainty at the moment and we are waiting for clarifications.