Industrialists, traders say thousands of jobs have been lost due to rising energy cost
AMMAN -- Leaders of key economic sectors have warned against another round of electricity tariff hikes because such a move "threatens the survival of businesses".
But the government seems out of options and is determined to raise power prices, most likely in June, to reduce the financial losses of the state-owned electricity provider, according to an official.
In its National Economic Reform Programme, announced late last year, the government said it would carry out comprehensive reforms in the electricity sector through further increases in tariffs in a bid to put an end to losses incurred by the state-owned National Electric Power Company (NEPCO).
Financial losses of NEPCO were estimated at JD1.19 billion in 2012 due to dependency on the costly imports of heavy fuel as a result of frequent disruptions of natural gas supplies from Egypt.
An expected rise in power tariffs in the weeks to come has been the talk of the public and has triggered heated debates between lawmakers and authorities with some MPs linking their vote of confidence of Prime Minister Abdullah Ensour's government to pledges from the premier to keep tariffs unchanged.
Bringing back NEPCO to cost recovery is part of a medium-term strategy the government and the International Monetary Fund have agreed on in order to enable the Kingdom benefit from a $2 billion loan under a 36-month Stand-By Arrangement.
Musa Saket, board member of Jordan Chamber of Industry, blamed hikes in electricity tariffs over the past two years for the worsening performance of the Kingdom's industrial sector.
According to Saket, in 2010 and 2011 the number of workers in factories was around 236,000 and the vast majority were Jordanians. Currently the number has gone down to 197,000.
"Rising energy costs caused severe losses to industrialists who were forced to lay off some of their staff in a bid to reduce their expenses," he told The Jordan Times over the phone Monday.
He noted that the government raised tariffs on industrial establishments by 23 per cent in May 2011. This was increased by 8 per cent two months later, indicating that frequent hikes in power tariffs on factories not only hurt the sector but also government revenues, according to Saket.
He added that the sector annually pumps around JD800 million into the Treasury in taxes, noting that over the past few years several industrialists have shut down their factories, while others departed the local market to Egypt, where energy costs are much cheaper than in Jordan.
Power costs in Jordan are 10-fold higher than Egypt and 20-fold higher than Saudi Arabia, Saket said, adding that Jordanian-made products struggle to compete with regional manufacturers.
Tareq Tabbaa, board member of the Jordan Chamber of Commerce, also voiced concerns over the impact of the planned rise in electricity tariffs on the commercial sector, calling on decision makers for dialogue with the private sector to find other alternatives.
"I'm not an energy expert but there should be other choices the government can resort to so as to address its financial woes," Tabbaa said, warning that end-users will be affected by the rise in electricity prices.
He told The Jordan Times that the electricity bill represents over 35 per cent of operational expenses of commercial shops and supermarkets.
"Profit margins of merchants are getting smaller every year due to rising power costs," Tabbaa said.
On Saturday, private hospitals sent a challenging message to the government: "Raise electricity tariffs and we will charge patients more."
Fawzi Hammouri, president of the Private Hospitals Association, told the press that hospitals will increase their fees by 10 to 13 per cent if the government goes through with the decision to increase electricity prices.
He also warned that higher electricity prices would limit private hospitals' ability to compete with other countries in the field of medical tourism.
According to Hammouri, hospitals pay 235 fils per kilowatt per hour, four times more than industrial companies and double the rates paid by hotels.
© Jordan Times 2013
