- Manufacturers fear higher production costs as PURC raises electricity tariff by 3.50%
The Association of Ghana Industries has warned that the latest electricity tariff adjustment by the Public Utilities Regulatory Commission could raise production costs for manufacturers by as much as 10.00%, despite the headline increase being set at 3.50%.
The warning comes after the PURC announced a 3.50% increase in electricity tariffs under its quarterly tariff review mechanism, a move the business lobby says risks weakening the improving macroeconomic environment that manufacturers had expected to support recovery and expansion.
Speaking on Joy News’ PM Express, Eric Defoe, Chairman of AGI’s Economic Affairs Committee, said the nominal increase does not fully capture the actual burden on industry because electricity costs feed into several layers of production.
“Nominally it appears to be only 3.50%, but the cumulative effect on production could rise to between 5.00% and 10.00%,” he said.
According to him, manufacturers are unlikely to experience the tariff increase only as a direct rise in electricity bills. Rather, the adjustment is expected to affect input costs, supplier pricing, logistics, packaging, cold storage, machine operations and other cost centres across the production chain.
The AGI said this cascading effect is particularly important for firms operating in energy-intensive sectors, where power is not merely an administrative cost but a core production input.
For manufacturers, electricity price increases can quickly affect margins, working capital and final consumer prices, especially in an environment where many firms are still recovering from earlier cost pressures linked to high inflation, elevated interest rates and exchange-rate instability.
The association questioned the timing of the tariff increase, arguing that several macroeconomic indicators have recently shown improvement.
Inflation has moderated significantly compared with previous levels, interest rates have been easing, and the cedi has shown greater stability. AGI said these gains should have created room for regulators to avoid imposing fresh cost pressures on businesses.
The business lobby also argued that global oil prices have begun to retreat following the easing of geopolitical tensions in the Middle East, reducing one of the key cost variables used in electricity tariff calculations.
According to the association, the PURC could have delayed the quarterly review or taken a more cautious approach to determine whether lower fuel prices would create space to moderate electricity costs.
AGI further maintained that quarterly tariff reviews should not automatically translate into upward adjustments.
The association said the review mechanism should be sensitive to broader market conditions, particularly when businesses are already dealing with tight margins and fragile consumer demand.
Its position reflects a broader concern within the private sector that utility price increases can undermine industrial competitiveness even when the headline adjustment appears modest.
For manufacturers, the issue is not only the percentage increase, but the total cost structure within which the increase occurs.
Electricity costs are embedded in factory operations, from running machinery and refrigeration systems to maintaining production lines, processing raw materials and packaging finished goods. When tariffs rise, suppliers and service providers may also adjust their own prices, spreading the cost impact through the value chain.
The AGI also questioned why consumers and businesses should face higher electricity charges after government recently introduced fuel-sector levies intended to strengthen power generation financing and address legacy energy-sector debts.
The association’s concern is that businesses may be bearing multiple layers of energy-related costs through tariffs, levies and indirect price adjustments.
The latest tariff debate underscores the delicate policy balance facing government and regulators.
On one hand, Ghana’s energy sector continues to face financial pressures, including legacy debts, generation costs, fuel supply obligations and the need to maintain reliable electricity supply.
On the other hand, industry requires affordable and predictable power to remain competitive, expand production, create jobs and support export growth.
Manufacturers have consistently identified electricity costs as one of the major constraints to doing business in Ghana. High utility prices increase production costs, reduce competitiveness against imports and make it harder for local firms to scale.
The concern is particularly acute for companies producing for export markets, where Ghanaian manufacturers must compete with firms in countries that may enjoy lower power tariffs, stronger logistics and cheaper financing.
If the AGI’s projected cost increase materialises, the 3.50% tariff hike could place renewed pressure on factory output, pricing decisions and investment plans.
Some firms may absorb part of the increase to protect market share, but this would reduce margins. Others may pass the cost on to consumers, adding to price pressures at a time when policymakers are working to sustain disinflation.
For households, the indirect impact could be felt through higher prices of locally manufactured goods, depending on how quickly businesses adjust pricing.
For policymakers, the AGI’s warning is a reminder that industrial recovery depends not only on stable inflation and exchange rates, but also on the cost and reliability of utilities.
A stable cedi and lower inflation can improve business confidence, but if electricity costs continue to rise, some of the expected benefits may be weakened.
The association is therefore urging regulators to take a broader view of tariff setting, one that considers the cumulative cost burden on industry, the current direction of global fuel prices, and the need to protect Ghana’s competitiveness as a manufacturing destination.
The PURC’s quarterly review mechanism is intended to reflect changes in key variables such as exchange rates, inflation, fuel costs and generation mix. But AGI’s position suggests that industry wants the regulator to apply the mechanism with greater sensitivity to business conditions.
For now, the warning from manufacturers is clear: a tariff increase that appears modest on paper could have a much larger impact inside the factory.
At a time when Ghana is seeking to boost local production, create jobs, expand exports and strengthen the 24-hour economy agenda, the cost of power remains one of the most important tests of industrial policy.
The latest tariff adjustment may help address energy-sector financing pressures, but for manufacturers, it risks adding another layer of cost just as the broader economy is beginning to show signs of relief.
