Electricity: The ferrosilicon industries in Pasakha are seizing an opportunity in the Bhutan Domestic Electricity Power Tariff Policy, 2015 (BDETP) draft, which was recently released for consultation to convince the government that the existing power tariff has distressed their competitive edge in the market since its inception in October 2013.
The Association of Bhutanese Industries (ABI) during a consultation meeting in Phuentsholing on October 8 furnished a host of proposals for consideration.
As the industrialists are left with six months before the Bhutan Power Corporation (BPC) and Druk Green Power Corporation (DGPC) proposes to the Bhutan Electricity Authority (BEA) for the next tariff cycle in April 2016, the industrialists say it was timely to know what the government may consider on the matter.
One of the major appeals the ABI wants to submit is to request the government to keep the tariff as “status quo” while the association worked on convincing the government to amend the Act and the regulations. Under this, to propose to amend the Tariff Determination Regulation (TDR) and BEA Act is the most notable feature of the proposals, since the ABI believes that the electricity tariff should be determined on the price cap model and not on the existing cost plus model.
The association’s vice president Chimmi Dorji said that in a cost-plus model calculation, the tariff would only shoot.
“Maybe this is the only chance,” he said. “We need to collectively and individually try to convince the government to understand our point of view as many of us are dependent on power tariff.”
As the electricity authority may approve the tariff BPC and DGPC propose for the next cycle, the association maintained that the economic affairs ministry must look into the economic well being of the country keeping in mind the larger picture.
“Inject subsidies to enable industries to afford electricity,” the association’s general secretary Jochu Thinley said. “Electricity is an impetus for industrial growth and one of the very few competitive edges our industries have.”
The association’s main stand about this is that the sale of electricity should not be as straight as any other trading. Considering hydropower to be a strategic natural resource, the economic affairs ministry must look into opportunities to maximise returns through different means of electricity, while benefiting the private sector and creating a win-win situation.
Jochu Thinley said a cost benefit analysis findings indicated electricity should be used as an input for value addition in the industries. Providing electricity at a rate at par or below the cost of supply and export must be considered.
“Tariff for the high voltage (HV) customers should be kept at par with the export price or below by providing subsidies,” he said.
As the medium voltage (MV) and low voltage (LV) consumers enjoy subsidies, the ABI also would propose if the government could offer subsidies to the HV consumers. The subsidy for this category was lifted in 2011.
After the third and the final power tariff revision came into effect in July this year, electricity bills went up by more than Nu 2 to 3 million a month, up by 10 percent for the Pasakha HV ferrosilicon industries.
This happened with the energy charge in the last phase climbing up to Nu 1.96 from the previous Nu 1.81, while the demand charge rose to Nu 180 per kW of power a month from the erstwhile Nu 155. Today an 18 MW plant with a monthly consumption of approximately 10 million plus units pay Nu 2. 26 (energy charge plus demand charge) per unit and the current export price remains at Nu 2.0 per unit.
The ABI also cited policy documents are usually set prior to Acts and other regulations, which was not in this case.
The BEA Act was passed in 2001, while TDR was drafted and approved in 2006. The association maintained that it is assumed that the clauses in the policy are set in the similar tone as per what is already specified in the Act and TDR.
Should there be any disagreement on the policy, the Act and the regulation will also have to be amended accordingly, officials said.
Another proposal the ABI would make for the industries is for the policy to have provisions for a tariff road map for at least 15-20 years down the line to enable investment plans and attract Foreign Direct Investments. The industrialists, meanwhile, would also hire consultants to study further.
Meanwhile, ferrosilicon industries are worried a Malaysian plant, Om Holdings has already started exporting this year. The plant has a capacity to export 308,000 metric tons of alloys, while the entire ferro establishments across the country could produce 110,000 metric tons.
The Malaysian government has given a tariff discount for about 20 years at the same rate. Exporting to Japan and India is cheaper for Malaysians than Bhutan ferroalloys companies.
Elaborating the contribution, industrialists say the economy would crash, should industries close shops, as the sector is second to hydropower in contributing to the country’s Gross Domestic Product (GDP).
The ABI would also soon conduct a consultation meeting with the Bhutan Chamber for Commerce and Industries.
Rajesh Rai, Phuentsholing