Factories may cut production in Pakistan amid rising energy costs

Factories owners fear that they may need to shut production due to an unprecedented hike in energy costs, which will be another disaster for the already struggling economy

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Mounting energy costs make it impossible to continue production for 40,000 industries in Karachi, according to an appeal by nine business groups in local newspapers on Thursday. The business groups appealed to the government for cheaper fuel charges for Karachi, one of the world’s biggest cities with a population of more than 20 million.

The global energy crunch is the major problem for the incumbent government, which came into power in April after a period of political upheaval. The nation’s energy import costs doubled to $17 billion in the 10 months ended April. Separately, Karachi’s power utility-K-Electric Ltd.-warned that it may start widespread power cuts, which could include prolonged rationing to industrial zones for the first time in 11 years. Power generators are struggling with rallying fuel costs and supply shortages. “These current conditions are severely hindering KE’s ability to procure fuel, causing a permanent curtailment of power generation” that translates to as much as 10 hours of planned blackouts for some parts of the city, said Sadia Dada, a spokesperson for K-Electric. The utility is urging customers to cut power consumption by 20% compared to last year’s levels.

Read more: Traders, Industrialists slam govt for increasing fuel, power tariffs

High global commodity prices and rising imports continue to fuel Pakistan’s inflation rate, which is the second-fastest in Asia. Industries are set for further pain after the government raised fuel prices last month as part of efforts to meet conditions set by the International Monetary Fund to revive a stalled aid program.

Read more: New Govt orders shutting 5500 MWs power plants, power cuts 

Pakistan is looking to sign a long-term liquefied natural gas contract, which would help reduce its exposure to the expensive spot market and alleviate shortages. Shahid Khaqan Abbasi, who is overseeing the energy sector for Prime Minister Sharif, told Bloomberg News that cutting power saves the nation $125 million every hour.

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