China hikes electricity tariffs for businesses and farms

China hiked electricity tariffs for businesses and farmers for the first time in more than a year, a move that threatens to increase inflation as it aims to curb power shortages in the backdrop of what may be the worst power shortages on record.

Rates for industrial, agricultural and commercial users in 15 provinces are set to rise starting tomorrow while residential customers would be spared, according to an official with the National Development and Reform Commission who declined to be identified because of internal rules.

According to analysts, the increase in electricity costs might complicate China's fight against inflation, which is above the government's target.

Some analysts say the world's biggest energy consumer might increase residential rates in the second half with higher costs spurring generation as pressure eased on profit margins that are under squeeze due to rising coal costs. An electricity shortfall this summer is feared to be around 40GW, surpassing the 2004 record, according to State Grid Corp of China.

China's top five power producers are China Huaneng Group Corp, China Datang Corp, China Power Investment Corp, China Guodian Corp and China Huadian Corp.

Last month, China hiked on-grid power tariffs, or prices paid to power suppliers by grid operators, to help electricity producers facing losses and analysts say with retail rates raised, there is scope for further on-grid tariff increases.