Steel consumers in Pakistan are going to feel the maximum heat of power tariff hike announced by the Government as steel prices would go up by Rs 5,000 per ton. Over 90 percent Pakistani steel melters and re-rollers are B3 category electricity consumers and according to revised tariff the B-3 TOD peak rate has been increased by 48 percent to Rs 18.81 from Rs 12.68 while its off-peak rate would rise by 68 percent to Rs 13 per unit from previous Rs 7.75.
Pakistan Steel Manufacturer Association said that the weighted average unit tariff increase for peak and off peak is Rs 5.4/unit. The off peak hours are 20 hours per day, whereas peak hours are 4 hours per day. PSMA spokesman said that as per S.R.O. 862(I)/2008, “(c) the production subject to sales tax liability shall be determined at one metric ton of billets or ingots per 800 KWH of electricity consumed for steel melters and at one metric ton of mild steel products per 130 KWH of electricity consumed for steel re-rollers”. He said that a billet consumes 800KWH/ton electricity which means the cost of billet would increase by Rs 4320 (800kwh X Rs 5.4/unit).
He said that as per SRO the cost of manufacturing deformed rebars/wire, rods, girders, angles, T-iron and sections consumes 930 KWH of electricity (800kwh billet and 130kwh re-rolled product). This means the cost of rebars and wire rods are to be increased by at least Rs 5022/ton.
He said that this is just the direct cost of the rerolled product that does not account for value of falling dollar by over 4 percent in the last few months. All raw materials for rebar and wire rods are imported such as scrap, ferroalloys and other goods hence manufacturers would be forced to increase the price of their steel products further. The Rs 5,000/ton increment in the steel prices would be a minimum cost pass over that the consumers are to feel after the unit tariff increment, he added. The historic rise in power tariff would also promote electricity theft among the steel sector that is already plagued with numerous small to medium size companies stealing electricity.
He said that gas loadshedding had also increased the cost of production and this further increase of power tariff would badly affect the steel manufacturing industry in Pakistan, and consumers at large would be burdened, especially construction cost would increase substantially in the country.-PR