Electricity tariff hiked by upto Rs7.50/KWh for Industrial, Residential users

July 22, 2023 (MLN): The government has raised electricity tariffs for industrial and residential (except low-income) customers by Rs7.50/KWh and an average of Rs6.45/KWh, respectively, as part of the Stand by Arrangement with the IMF, to reduce the deficit and pass on the higher capacity payments to the end users.

The proposed rates vary based on different consumption levels, which includes Rs3 per unit for consumption up to 100 units, Rs4 per unit for consumption ranging from 101 to 200 units, Rs5 per unit for consumption between 201 and 300 units.

Similarly, Rs6.50 per unit for consumption between 301 and 400 units, and Rs7 per unit for consumption between 401 and 700 units.

The proposed electricity tariff hike could have a negative impact on electricity-heavy industries, such as Long steel, unless they can pass on the cost to their customers.

Some cement producers who depend on the grid for power could also see their margins shrink due to the higher electricity cost.

The estimated cost increase for cement production using the grid could be more than Rs50 per bag. However, the actual impact would vary across companies depending on their power sources.

According to Arif Habib Limited, this hike in average electricity tariff will have an impact of Rs896bn in the form of incremental revenue in the current fiscal year (FY24).

In addition, they estimate the direct impact of the aforementioned CPI would be around 85bps, however, there would be a second-round impact in the upcoming months.

"We have already factored in the impact of the electricity tariff increase into our CPI estimates(20.8%) for FY24." AHL added.

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