Massive tariff hike to raise Rs125bn for power sector

Updated October 03, 2019

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The move comes ahead the first quarterly review by the IMF mission due later this month.
The move comes ahead the first quarterly review by the IMF mission due later this month.

ISLAMABAD: In dramatic shocks to power consumers, the government on Wednesday increased electricity tariff by a cumulative Rs2.50 per unit to generate about Rs125 billion additional revenue for the power sector ahead of first quarterly review with the International Monetary Fund (IMF).

In one of the decisions on Wednesday the Economic Coordination Committee (ECC) of the Cabinet “approved the additional charge of Rs0.30 per unit” for all consumers of electricity except residential consumers of less than 300 units per month, said an official statement.

In another decision on Wednesday, the National Electric Power Regulatory Authority (Nepra) approved an increase of Rs1.66 per unit under automatic monthly fuel price adjustment for electricity consumed in August to generate about Rs23bn in additional revenue to the power distribution companies.

Nepra Chairman Tauseef H. Farooqi confirmed at a public hearing that the regulator had been asked at the highest level to allow tariff increase of an average 53-paisa per unit. He said the Nepra team had worked day and night to deliver on commitments given to the IMF.

Nepra approves series of requests, adding Rs2.5 per unit to power tariff

This was on top of 53-paisa per unit increase in tariff notified by the Power Division on Tuesday, thus making the total increase to 83 paisa per unit. The cumulative financial impact of this increase in tariff was estimated at around Rs100bn, a senior government official told Dawn.

He said the increase in tariff in that manner was necessary to meet targets agreed to with the IMF under the $6bn Extended Fund Facility (EFF). The fund mission is due for first quarter review later this month.

Secretary Power Irfan Ali and Joint Secretary Zargham Eshaq Khan declined to explain the decisions taken on the summaries of the Power Division. An official statement coming out of the ECC meeting said the meeting “approved a proposal to notify the Nedpra approved adjustments for Q3 & 4 of 2018-19 and annual adjustment/indexation after incorporating the target quarterly subsidy and additional charge to maintain uniform tariff”.

It said the proposal was submitted by the Ministry of Energy for tariff rationalisation for power sector-quarterly and annual indexation/adjustments of distribution margin. “The ECC further directed for the adjustment to be shown separately in the consumer bill and applicable for next 12 months effective from Oct 1.”

Similarly, the ECC in order to fully protect the lifeline and domestic consumer consuming up to 300 units, approved the additional charge of Rs0.30 per unit so that the impact of instant adjustments was not passed on to lifeline and domestic consumers up to 300 units and at the same time the consolidated revenue requirement approved and determined by Nepra on Sept 27 was maintained.

An official explained that Nepra had approved 53-paisa per unit increase in average power tariff but the government decided to exempt less than 300 units per month consumption of domestic consumers from this increase.

Published in Dawn, October 3rd, 2019