Published On: Thu, Dec 7th, 2017

Non-viable KE tariff will retard industrial sector’s growth in Karachi: FPCCI

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KARACHI: Karachi is home to some of the largest industries in Pakistan and makes a significant contribution to the country’s Gross Domestic Product (GDP). In case the city does not meet the required investments for infrastructural upgrades due to an unviable tariff, it may not only adversely affect the people of Karachi in terms of extended load-shedding but will also retard industrial sector’s growth and operations.

These views were expressed by FPCCI Vice President Mirza Ishtiaq Baig during Multi-Year Tariff Reconsideration hearing which was attended by businessmen, renowned professionals, philanthropists and civil society representatives.

On this occasion, Power and Finance Joint Secretary Zargham Khan who represented the Power Division in MYT reconsideration request, said that federal government is in the process to privatize more public-sector entities and any adverse decision with regard to KE’s tariff will have negative impact on government’s plan to privatize other public-sector entities, besides adversely affecting the financial viability of KE and subsequently consumers of Karachi will suffer.

Zargham told the hearing, chaired by Nepra Chairman Tariq Sadozai, the government desired that K-Electric should be able to supply electricity to Karachi consumers, therefore, it approached the regulator for tariff review.

A representative from Pakistan’s most eminent business policy advocacy platform Pakistan Business Council (PBC) also shared input during the session and said, “Regulatory policies should not engender investment which is required to ensure a reliable supply of power to the most important commercial city of the country. Fixed rate based tariff structure assuming a fixed investment plan is not viable for a vertically integrated utility such as KE where additional investments may be required. The improvement in infrastructure that has occurred in Karachi since KE’s privatization has only been possible through an aggressive influx of capital across the entire value chain. It is therefore imperative to revisit the policies which underpin KE’s operations and modify them in a manner to allow adequate returns.”

Analysts from leading banks such as HBL and UBL explained in detail that the determined tariff will adversely affect KE’s ability to raise financing for ongoing and future projects. The analysts also recommended the regulator to provide a longer tariff period to KE, giving more comfort to lenders and as such may allow KE to raise its requisite financing for long-term replacement and expansion plans and projects. –Agencies

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