Supply-side reforms: Differential pricing of electricity for steel manufacturer

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electricityNational Development and Reform Commission and the Ministry of Industry and Information together determined to set higher electricity price for obsolete equipment in steel manufacturing(link). Companies owning equipment listed on “obsolete equipment list” would be charged additional electricity price. The total output of “obsolete” accounts for 10% of total steel production. The supply side reform does contribute to this price differential policy. It is argued that this policy is in favor of big manufactures while small companies will be worse off.

I think this is a small step in the attempt to get rid of old production methods and it could be praised. The problem, as in most similar situation, lies in understanding how the rationale and cut-off points were decided and if this can be seen as a way to penalize certain companies vs others or a genuine incentive for ALL steel producers to upgrade their fixed assets. Time will tell.

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