New taxation and tariff hike have halted revival of closed industrial units, expansion of present setups and new investments, according to power sector experts. They also noted that partially operating units have also come to a halt. They said that provision of electricity at the rate of 7.5 cents per unit to zero-rated industry also hangs in balance because of government's silence on the issue of tariff after abolition of zero-rated regime.
The gurus of power sector are predicting that 17pc sales tax and 5pc income tax will be slapped on the electricity tariff after doing away of zero-rated status which will directly increase the tariff by 22pc. Besides, devaluation of rupee against dollar will further increase the tariff and it will be devastating for the beleaguered export-oriented industry.
The experts have estimated a burden of more than Rs 20 billion on this segment of industry after new taxation. Those exporting their products can claim refund of this 22pc additional burden, but it is pertinent to highlight that a sizeable number of refund claims will not be filed because of cumbersome documentation process for which consumers have to bear extra cost. The production cost will swell up in the process and their competitiveness will be eroded with the regional players and in the international market. Resultantly, exports will drastically drop and it will be a setback to the national economy, they said.
Furthermore, they said new industrial tariff for non-zero-rated industry is likely to be fatal for the sector because the latest withdrawal of industrial support package of Rs3 per unit during off-peak hours approved by ECC with effect from 01 July, 2019 will play havoc with them. The continuation of industrial support package during peak hours is of no significance for a single/two shift(s) industry because they don't operate during peak hours. The anticipated increase in tariff for this segment of industry will just not be around Rs1.50 per unit but more than it.
The experts have suggested that the industry will have to bear an additional burden of approximately Rs91 billion. This is an additional input cost and its impact on the prices will be magnanimous. This will make small and medium enterprises vanish from business scenario. Consumers do not have capacity to absorb this high cost. The inflation will go sky-high and this situation will be disastrous for all the stakeholders. Reportedly, the IMF is emphasising further raise in power tariff in August 2019 which will be tantamount to last nail in coffin of the industry.
The after-effects of Budget 2019-20 on electricity are horrifying the industry and these must be perceived in a rational perspective; otherwise, this sector will be doomed. Those sitting at the helm of affairs must take cognizance of the situation to rid the industry of severe crisis.
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