“This would also eventually
lead to a number of small and medium enterprises (SMEs) closing. The decision
would be a severe blow to SMEs, which are currently striving hard to stay
afloat in these difficult financial times,” Al-Riyadh newspaper quoted industry
sources as saying.
Industry experts said most
SMEs are presently facing challenges that threaten their very survival,
including acute liquidity deficits, weak lending and increases in the prices of
raw materials.
They added that it is not
possible for such firms to suddenly increase the prices of their products,
especially considering the stiff competition they currently face in both the
local and international markets.
However, Salman Al-Jashi,
chairman of the Industrial Committee at the Eastern Province Chamber of
Commerce and Industry, said that the hike in tariffs, which is effective from
July 1, will not have any direct impact on SMEs. He, nevertheless, described
the Saudi Electricity Company’s (SEC) decision to increase prices, on the
recommendation of the Saudi Electricity and Cogeneration Regulatory Authority,
as a wrong and unwise step.
“The Kingdom’s industrial
sector has to bear an additional burden as a result of the hike in tariffs.
Moreover, foreign investors are reluctant to make further investments in this
vital sector,” said Al-Jashi.
Meanwhile, Abdullah Al-Sanie,
deputy chairman of the Industrial Committee, said the decision to raise power
tariffs will badly affect the sector. “The authority has allowed incentives to
encourage the industrial sector to shift consumption loads from the peak period
to off-peak periods with lower prices. But this is not practical. It is very
difficult for factories to stop production during peak periods. Any halt in
production and the subsequent resumption of production would cost them
heavily,” he said while urging the SEC to review its decision to make huge
increases in tariffs during peak periods.
Minister of Water and
Electricity Abdullah Al-Hussayen announced the decision to increase power
tariffs at a press conference in Riyadh on Saturday. The increase charges for
government, commercial and industrial users will add more than SR3 billion to
the SEC’s annual revenue. Household consumers have been exempted from the
increase.
Al-Hussayen said the tariff
for commercial and government sectors per kilowatt/hour will be based on three
bands. In the commercial sector the tariff for the band from 1 to 4,000 kw/hour
will be 12 halalas. The same band in the government sector will be charged 26
halalas. The second band from 4,001 to 8,000 kw/hour in the commercial sector
will be charged 20 halalas while for the government sector it will be 26
halalas. The tariff above 8,000 kilowatt/hours will be 26 halalas for
commercial and government sectors.
The minister further
clarified that the tariff for industrial consumption has been divided according
to months with varying levels of consumption. While consumption is higher in
summer, it is lower in winter.
