Former President of the Islamabad Chamber of Commerce and Industry (ICCI), Dr. Shahid Rasheed Butt, said on Thursday that the high cost of electricity is the primary barrier to exporting goods. He noted that per capita electricity use has been steadily declining for the past five years, and capacity charges will grow if demand does not increase.

Shahid Rasheed Butt said in a statement issued here today that the power sector deficit should not be addressed by frequent tariff hikes but through the imposition of taxes on the elite. He said the continuous increase in the cost of electricity is severely affecting the people and production sector. Substantial increases in production and exports are impossible without making electricity cheaper.

He said that the current price of electricity is the biggest obstacle to exports and project-based development. He informed us that, according to an estimate, a ten per cent increase in the price of electricity reduces its use by three per cent.

Due to the high cost of electricity, many industries and people have started using other sources, including gas and solar power. Therefore, the burden of capacity payments is increasing for the public. If the demand for electricity does not increase by 15%, the capacity payments will increase by 50 percent.

The power sector is losing trillions of rupees, so electricity is getting more expensive. However, there is no focus on lowering the electricity price and compensating for the deficit through taxes on the elite. The payments made to private-sector power plants are in dollars. Therefore, the rupee’s depreciation increases the volume of payments, indicating a need to link them to the local currency.

Rather than investing in highly efficient power plants, costly gas is currently going to captive power facilities that are only moderately efficient. Reallocating the same gas to efficient power plants can decrease the generation cost. We should incentivise industries to rejoin the grid, thereby reducing capacity charges.

He said that IPPs should be able to engage in bilateral agreements with private customers to sell any excess capacity to them, further distributing the burden of capacity charges.

He warned that more industries and commercial businesses are expected to go off-grid by setting up private energy-generating capacities, which will drive up capacity prices per unit.