Sky-rocketing Furnace Oil Prices and Dwindling Gas Supply Adversely Impacting Power Tariff: Karachi Electric Supply Company

Karachi: Karachi Electric Supply Company expressed serious concerns over the recent notification by the state owned oil company for the yet another hike in the price of furnace oil. This continuously increasing price bubble is more worrisome in the wake of the current persisting gas shortage especially for power generation, forcing an unfortunate incremental reliance on the 3.7 times more expensive fuel, which will definitely have a further adverse impact on the power tariff for the end users.

In a simple comparison, the price of furnace oil in July 2009 stood at approximately Rs. 38,000/ton (inclusive of GST) which has now ballooned to an unprecedented level of around Rs. 82,000/ton as of January 2012.

This in other words means that the cost of a primary input has increased by a whopping 112% in merely two and a half years. Moreover due to the ever decreasing supply of natural gas to KESC, the furnace oil consumption in the fiscal year July 2009-June 2010 was Rs. 26 Billion (576,486 tons), increasing by almost 104% to Rs. 52.6 Billion (910,548 tons) in the fiscal year July 2010 – June 2011.

Importantly to note over here is the fact, that the end user tariff is a direct function of the fuel mix that is used to generate electricity – and with the above stated incremental reliance on furnace oil due to inadequate gas provision, the adverse impact is befalling not only KESC, but also the power consumers in terms of the fuel surcharge adjustment (FSA), passed onto them via the tariff determined by NEPRA.

KESC has always worked towards the objective of keeping the power tariff low, hence has been stressing on the fact that the provision of the required quantity of natural gas to generate power is the only sustainable solution.

In the interest of the public at large, the government needs to intervene and consider rationalizing the input costs for power generation, the unchecked spiralling of which is turning electricity into a luxury rather than a necessity by the sheer virtue of its cost. Reach of the common man.

For more information, contact:
Adil Murtaza
Assistant Manager, Media and PR
Karachi Electric Supply Company Limited (KESC)
2nd Floor, State Life Building No 11, Abdullah Haroon Road, Saddar, Karachi
Tel: +9221 9920 7163
Cell: +92346 822 3641
Email: adil.murtaza@kesc.com.pk