BEIJING: China will allow higher power prices in its most dramatic reform in years in a bid to ease a worsening energy crunch that’s a threat to its economy.
Electricity prices will be allowed to rise by as much as 20 per cent against a benchmark, compared with a current cap of 10 per cent, said a statement posted by the State Council, the country’s cabinet, after a meeting chaired by Premier Li Keqiang, report agencies.
A power crunch across China has rippled from factory floors to homes as the nation’s coal-based electricity producers, which account for more than 70 per cent of the country’s generation, are unable to buy enough fuel. That’s also crimping growth forecasts for the world’s second-largest economy. China’s government has asked miners to spare no effort in boosting coal supplies, and has given them permission to operate at full capacity even after hitting their annual quotas. A shortage of the fuel could cut industrial power use by 10 per cent to 15 per cent in November and December, which would potentially translate into a 30 per cent slowdown in activity in the most energy-intensive sectors like steel, chemicals and cement-making, said UBS Group.
Local governments are being urged to offer power-price discounts to smaller firms, and tax deferment will be offered to coal and power companies, the State Council statement said on Friday.