Costly Energy to Trigger Unemployment, Hit Exports, Warn Industry Leaders
KARACHI: The business community on Friday criticized the government’s decision to hike petrol and diesel prices by a whopping Rs60 per liter in less than a week and the sudden increase of Rs7.9 per unit in the tariff baseload electricity will not only increase the cost of generation, but also the cost of doing business and ease of doing business indices.
The double blow to the general public and industries in the form of a massive hike in electricity and oil prices would fuel food inflation in addition to making the country’s exports uncompetitive in the global market.
The National Electric Power Regulatory Authority (Nepra) on Thursday raised the base tariff to Rs24.82 per unit effective July 1 from Rs16.91 while the finance minister on the same day increased petrol tariffs and diesel from additional Rs30 to Rs209.86 and Rs204. .15.
Acting President of the Federation of Pakistan Chambers of Commerce and Industry (FPCCI), Suleman Chawla, says the cumulative effect of rising fuel and electricity tariffs could trigger historic economic stagnation which would lead to numerous bankruptcies, inevitable defaults due to electricity bills, leaving many export orders unfulfilled, in addition to causing huge loss of job opportunities and tax revenue.
Say a peak of inflation to multiply the misfortunes of the beleaguered masses
Inflation, which had already soared to 13.8%, would cross 20% in a short period of four to eight weeks, he feared.
Mr Chawla said rising electricity and oil prices will seriously affect the masses. The government should propose a protection mechanism for SMEs in consultation with the apex chamber, because small and medium-sized enterprises are the real engine of growth and job creation.
Anis Majeed, chief patron of the Karachi Wholesalers Grocers Association, told Dawn that he expects the prices of essential groceries to rise further by 3-4 rupees per kg after the new rise in fuel tariffs and electricity.
Earlier, prices rose by Rs2-3 per kg when Mr Miftah raised petrol and diesel prices by Rs30 per liter on May 27.
He said many products like pulses are vulnerable to international tariffs, high transport costs and uncertain exchange rate parity. The government should have devised a mechanism to relieve the already strained masses, he observed.
Korangi Trade and Industry Association (KATI) chairman Salman Aslam said the government had dropped petrol and electricity bombs on the people’s week which would raise the cost of production to a dangerous level.
He said the government was failing to provide relief to the masses rather that its decisions had multiplied the problems of the public contrary to the promises it had made before coming to power.
Foreign exchange reserves also hit their lowest level in three years as the government has yet to formulate a clear policy that could avert economic hardship for the poor masses.
Economic instability has put investment at risk and it has become impossible to manage industries with the highest cost of production on record, he warned.
The head of KATI feared a sharp increase in the unemployment rate and the government should take immediate decisions, in consultation with stakeholders, to provide relief to the low-income group, in addition to providing investment protection through rescue plans for industries.
Site Association of Industry President Abdul Rashid has urged the government to reverse two unpopular decisions in the best interest of consumers as well as trade and industry. Otherwise, the dream of developing the country’s economy would never come true.
He said that the business community will not accept Nepra’s self-imposed decision because raising the base electricity tariff without a public hearing is a complete violation of the laws.
He urged the government to refrain from taking such harsh decisions that put the survival of industries at stake.
He said the government should take measures such as reducing oil prices and electricity and gas tariffs to reduce the cost of doing business to promote exports.
Mr. Rashid asked Prime Minister Shehbaz Sharif to issue a notification to abolish the 17% sales tax on solar power as per his promise, to also explain the HS code for importing raw materials while the 30% duty on import of machinery should be abolished immediately so that production activities can be promoted without any hindrance.
Pakistan Yarn Merchants Association chairman Saqib Naseem has called the sharp rise in energy prices a disaster for business and industry. He urged the Prime Minister to reduce utility charges so that commercial and industrial activities can continue without delay.
Posted in Dawn, June 4, 2022