By Abdel Qader Ramadan
Factories have demanded the government provide a clear vision to solve the energy deficit and create mechanisms to enable continuous energy provision without interruptions before discussing price increases.
“Fertiliser plants are operating at no more than 50% of their productive capacity due to insufficient gas supplies,” said Walid Hilal, Chairman of the Export Board for Chemical Industries. He added that factories have a pointed demand for the government, which is “a clear and transparent plan for energy pricing over the next three years at least.”
“The government has not yet responded to investors’ demands regarding the plan to eliminate energy subsidies…as they did not announce savings mechanisms,” added Hilal.
He stressed that factories may not focus on the price and its impact on costs, as they are more interested in bringing in uninterrupted gas in the required quantities for efficiency and profitability.
Mohammed Said El-Din, Deputy Chairman of the Chamber of Petroleum and Chairman of the New and Renewable Energy Commission of the Federation of Industries, said that prices must not be raised all at once to keep factories and their competitiveness unaffected.
He anticipates that new prices will be introduced at the beginning of the new fiscal year on 1 July. He added that it does not make sense to delay the process to keep the new president’s popularity unaffected, saying: “The new president wants reform.”
An official source at a cement company who preferred to remain anonymous said that he was “surprised” at the government’s desire to raise gas prices for factories at a time when a gas shortage impacts their productive capacity.
“Gas goes to power plants…and we anticipate a crisis in supplying gas to factories as temperatures intensify in the coming summer months,” said the source. The source added that the factories have yet to make up for the gas deficit with some unready for this.
“Steel mills accepted a gas price increase to $6 but under two conditions: first, that gas be supplied regularly at contracted amounts without interruption, and secondly, that the increase takes place in two phases: a $ 1 increase during the current fiscal year and another in the following fiscal year,” said Mohamed Hanafi, Director General of the Chamber of Metallurgical Industries in the Federation of Industries.
Hanafi said that the increase in energy prices for factories is anticipated and that a “price formula” must be set to clarify the increase and the choice of $ 6 specifically. He questioned how far prices would remain the same should gas production return to robust levels, and if there would be guarantees on keeping prices low with the increase in domestic production.
Prices should move with supply and demand, he added.