The steel sector, a pivotal pillar of economic infrastructure, relies heavily on electricity as a primary input, with power costs constituting over 50% of production expenses. The escalating electricity prices have already forced several steel units to shutter their operations while those still operational are functioning at a fraction of their capacity.
Pakistan Association of Large Steel Producers (PALSP) has repeatedly appealed to the government to provide electricity to the steel industry at reduced rates and foster maximum capacity utilisation instead of releasing payments to the independent power producers (IPPs) for unused electricity.
In FY2023-24, electricity consumers will collectively bear staggering capacity charges of Rs2.025 trillion, a burden exacerbated by idle power plants.
The industry faces the grim reality of poor agreements with these power plants, which stipulate that capacity charges must be paid even if government utilities fail to draw electricity from them. Adding to this crisis, Nepra recently green-lighted a Rs3.28 per unit increase in electricity rates for all consumers.
