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23
Wed, Aug

Steel factory shuts down due to high power tariffs

A steel factory in the Tema free zones enclave, Rider Steel Ghana Limited (RSGL), has been shut down due to what management describes as “high electricity tariffs.”

As a result, more than 350 workers of the factory have been laid off.

In an interview with the Daily Graphic in Tema, the General Manager of RSGL, Mr Tarini Prasad Patnaik, said the electricity tariffs paid by the company were higher than the rates approved by the Public Utilities Regulatory Commission (PURC).

 

That was because Rider Steel was located on a multi-purpose industrial park (MPIP) housed within the Tema free zones enclave which had a private company, Enclave Power Company (EPC), supplying them with electricity.

Unfair treatment

“We have been asked to pay GH¢0.52 per kilowat hour (Kwh),” while other steel comapnies which pay directly to the Electricity Company of Ghana (ECG) are charged at GH¢0.2185/Kwh.

Mr Patnaik explained that all steel companies following the power tariff increases of 2010 negotiated with the PURC to pay a preferential tariff lower than the GH¢0.52/Kwh.

That was because power constituted a major input in steel production and the high tariff was injurious to their survival.

Mr Patnaik said due to the bad macroeconomic environment for the steel industry in 2015 and 2016 and in order to save the local steel manufacturers, the PURC asked ECG to maintain the preferential electricity rate given to the steel mills back in 2010 and ECG had been abiding by the tariffs since.

“The difference between the negotiated rate of ECG for other steel mills and rates paid by Rider Steel is about 250 per cent higher, hence increasing our production cost to levels that make us unable to compete in the same market.

“We have appealed to the PURC, the Energy Commission, the Volta River Authority (VRA) and other stakeholders, but to no avail,” he added.

Halted plans

Mr Patnaik said prior to their challenges, the company was on the verge of an expansion, having secured a parcel of land in Kumasi for another steel factory.

He said all those plans had been halted due to the high tariffs which were consuming their profits and making their factory run at a loss.

“We commissioned this factory with an investment of US$15 million and we have lost US$5 million already. We can’t risk losing more, so if by the end of March we don’t get any positive response, the factory will be shut down completely,” he lamented.

Unemployment

“Ghana is seeking foreign investment and trying to attract people to set up factories, yet the factories in Ghana are sitting idle because of unfair treatment and discrimination,” he said.

The Finance Manager of RSGL, Mr Orland Ashiagbor, also mentioned that the company was not asking for reduction in tariffs but equitable and fair treatment.

He said apart from the fact that the company had laid off workers, the government was also losing revenue because they used to pay GH¢20,000 monthly in taxes to the government and since they stopped producing, the country had lost at least GH¢100,000 over the last five months. 

Negative effects

A Daily Graphic team that toured the premises saw that only a few of the administrative staff were at post.

 

One of the workers, who was loitering, said since he was asked to go home things had become very difficult for him and his family. “The salary was very good and it came with a lot of benefits such as free medical care. It is really sad; I hope things will get better,” he said.