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Pay high tariff and wait for improvement

Updated August 01, 2013

ISLAMABAD, July 31: Making a lot of high-sounding promises about the future energy scenario, the government’s power policy officially announced on Wednesday envisages an immediate increase of more than 50 per cent in the electricity tariff for consumers in industrial and commercial sectors and for domestic and agricultural from Oct 1.

The five-year National Power Policy was approved at a meeting of the Council of Common Interests (CCI) presided over by Prime Minister Nawaz Sharif and attended by the four chief ministers.

Because of strong resistance put up by Sindh, Balochistan and Khyber Pakhtunkhwa, a proposal for at-source deduction of electricity arrears from the provinces’ share in the divisible pool was deferred.

Power Minister Khawaja Asif said the proposal would be taken up again about a month later.

He claimed that the country had achieved a record electricity generation of 16,170 megawatts on Tuesday and was maintaining an average generation of 15,000-16,000MW.

He said the centre had requested the provinces to jointly work out a timetable for closing markets during peak usage hours to save 1,200MW so that maximum business was done by using sunlight. About six million energy savers will start reaching consumers this year to help save about 800MW.

“Look at the gravity of the energy shortage and the extravagance that we exhibit in our power uses as if there is no problem at all,” he said and appealed to people to adopt energy conservation habits.

He said the CCI had approved laws to increase punishment and fine for electricity and gas theft and to make them non-bailable and non-compoundable offences.

The judiciary will be requested to set up special utility courts to dispose of such cases quickly.

The secretary for water and power said 23,713 cases of energy theft had been registered last year and about a third of them had reached the conviction stage with the maximum punishment of three-month imprisonment and Rs1,000 fine. Now such cases will attract a maximum imprisonment of three years and Rs10 million fine.

However, representative of one province said the laws had not been approved by the CCI.

At the request of provincial governments, the attorney general and some independent legal experts would give opinion about making the steps conform to principles of jurisprudence.

The power policy promises energy surplus by the end of the current government’s five-year term by using coal and hydropower resources and the overall tariffs declining to less than Rs10 per unit.

But the immediate step to be taken under the policy is to increase tariff by up to 66pc for industrial and commercial consumers with effect from Aug 1 and for domestic and agricultural consumers from Oct 1.

Addressing a news conference after the CCI meeting, Khawaja Asif said the exact revised rates would be announced in a day or two after approval of a summary by the prime minister.

“There will be no change in the rates for consumers using less than 200 units per month,” he said.

He said the slab benefit of lower rates for higher consumption groups in the domestic sector had been done away with.

Consumption will be charged at the rate of highest slab. For example, someone consuming 701 units will be charged at the highest rate without getting the lower rate benefits of 100, 300, 500 units slabs.

An official accompanying the minister said the average tariff for industrial consumers would go up to about Rs15 per unit from Rs9 and the average commercial tariff would rise to Rs13.22.

The rate for bulk sales to residential colonies will be about Rs12 and average domestic rates will touch Rs15.50.

“The basic principle is to implement the minimum determined tariff of Nepra for each category to reduce a current gap of Rs5.81 per unit between the applicable and determined rates,” he said.

The minister said the increase had been necessitated by a 13-14 month freeze on tariff imposed by the previous government. “Had the previous government gradually adjusted the tariff, the situation would have been much better and we would have paid Rs480 billion to retire circular debt.”

He conceded that electricity theft and system losses cost up to Rs200bn a year and that honest consumers were being made to pay for that. He said the tariff increase was ‘inevitable’ to ensure that circular debt did not accumulate again and to contain the subsidy and protect poor consumers.

He said a ruthless campaign against electricity and gas theft was under way in Punjab, while Khyber Pakhtunkhwa had earmarked three police stations to help electricity officials curb theft and ensure recovery. Similar steps will be taken in Sindh.

The minister said the burden of subsidy also ultimately fell on the people and an attempt had been made to burden those who could afford it to avoid accumulation of Rs600bn debt next year.

He said the main thrust of the policy was to rationalise the energy mix with hydropower and coal as the main anchors of growth to gradually scale down the overall power cost in 3-5 years to an affordable level. For this, the government would provide infrastructure at specific locations after consultations with the provinces to create “coal corridors” and “energy cities”, like Gadani, where local and foreign investors would invest without running for permits and licences because it was not possible for the government to invest $7-8bn to install 5,000MW of additional capacity or a total of $10-12bn for transmission and distribution network, he said.

Replying to a question, he said two feeders in Bannu had been closed down due to widespread electricity theft and non-recovery of dues. “We have requested the chief minister to hold a jirga and persuade the people to pay their bills and arrears if the electricity supply has to be restored. We will not allow premium on theft.”

The CCI approved a request of the Pakhtunkhwa government to focus on run-of-river hydropower projects. It also agreed to a proposal of the Sindh chief minister to make it mandatory for coal-based power projects to use Thar coal specifications instead of imports, but with a modification on the request of the Punjab chief minister to use the specifications of all domestic coal resources.

The Sindh government also demanded revival of an incentives package for Thar coal and also the powers of the Sindh Energy Board.

The CCI also increased the gas prices for producers under the 2007 and 2009 petroleum policies from $2.6 per million BTU to $3.26 and $3.49 instead of $6.3 earlier determined by former adviser Dr Asim Hussain. However, the rate will be raised up to $6.3 in case the producers increase production by at least 10pc beyond their committed investment and work programme within two years.