KARACHI, Aug 7: A sharp increase in power tariff would push up steel prices by Rs5,000 per tonne.

Over 90 per cent of steel melters and re-rollers in Pakistan are B3 category electricity consumers, and according to the revised tariff, B-3 TOD peak rate has been increased by 48pc to Rs18.81 from Rs12.68 folllowed by its off-peak rate by 68pc to Rs13 per unit from previous Rs7.75.

In a statement, Pakistan Steel Manufacturer Association said that the weighted average unit tariff increase for peak and off-peak is Rs 5.4/unit.

The off-peak hours are 20 hours per day whereas peak hours are four hours per day.

A PSMA spokesman said that as per SRO 862(I)/2008, "(c) the production subject to sales tax liability shall be determined at one metric tonne of billets or ingots per 800 KWH of electricity consumed for steel melters and at one metric tonne of mild steel products per 130 KWH of electricity consumed for steel re-rollers.

He said that a billet consumes 800KWH/ton electricity which means cost of billet would increase by Rs4320 (800kwh X Rs5.4/unit).

He said that as per SRO, the cost of manufacturing deformed rebar/wire, rods, girders, angles, T-iron and sections consumes 930 KWH of electricity (800kwh billet and 130kwh re-rolled product). This means the cost of rebars and wire rods are to be increased by at least Rs5,022 per tonne.

He said that this is just the direct cost of the re-rolled product that does not account for value of falling dollar by over 4pc in the last few months.

All raw material for rebar and wire rods is imported, such as scrap, ferroalloys and other goods, hence manufacturers would be forced to increase the price of their steel products further.

The historic rise in power tariff would also promote electricity theft among steel sector that is already plagued with numerous small to medium size companies stealing electricity.

He said that gas load-shedding has also increased cost of production and further increase of power tariff would badly affect steel manufacturing industry, and consumers at large would be burdened, especially construction cost would increase substantially.