ECC to take up K-Electric tariff increase today

Updated 03 Jul 2020

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Question of increase in electricity rates for Karachi consumers had become quite complex. — AFP/File
Question of increase in electricity rates for Karachi consumers had become quite complex. — AFP/File

ISLAMABAD: With the beginning of the new fiscal year, the government has called a meeting of the Economic Coordination Committee (ECC) of the Cabinet to settle two crucial decisions – an immediate increase of Rs2.39 per unit in electricity tariff for K-Electric customers and adjustment of Rs73 billion cost of imported re-gasified liquefied natural gas (RLNG) in gas consumers tariff.

To be presided over by Finance Adviser Dr Abdul Hafeez Shaikh, the meeting is also expected to consider urea fertiliser availability for FY21 and provision of subsidy to two fertiliser plants — Agritech and Fatima Fertiliser — and approve National Telecommunication Corporation revised budget for 2019-20 and Budget Estimates for 2020-21.

Informed sources said the question of increase in electricity rates for Karachi consumers had become quite complex and the Power Division had proposed two solutions to the ECC. The issue pertains to settlement of previous quarterly adjustments for KE for almost four years, necessitating about a Rs4.88 per unit average raise.

Given such a sudden shock in one go, the Power Division has proposed passing on Rs2.39 per unit average increase with immediate effect to bring KE at par with uniform national tariff currently applicable for all the distribution companies of ex-Wapda. That would mean about Rs1.09-Rs2.90 per unit increase for different consumer categories. At present, the KE tariff is lower than national and this has been going on for about 18 months.

Secondly, the Power Division has suggested that the remaining part of about Rs2.59 per unit should be sent back to the National Electric Power Regulatory Authority (Nepra) to be dealt with under Prior Year Adjustment (PYA) mechanism for gradually making part of the base tariff.

According to informed sources, the Karachi-based power utility had been lobbying for settlement of entire backlog in one go, entailing about Rs71bn subsidy which it wants the Ministry of Finance to pick up.

On the other hand, the government has allocated an amount of Rs25bn subsidy in FY21 budget to ensure uniform base tariff across the country, which could be increased at such early stage of the fiscal year and because of commitments with the International Monetary Fund. It also has to keep in mind the prevailing power supply situation in Karachi as a major tariff increase amid massive loadshedding could have major political repercussions.

It may be recalled that the Rs4.88 per unit increase in average tariff had been allowed by the regulator in December 2019 under previous adjustments for 11 quarters – from July 2016 to March 2019 — but the government has been delaying a final decision.

According to Nepra, the average KE tariff stood at Rs12.82 per unit before the latest revision to Rs17.69 with an increase of Rs4.88, involving a total revenue impact of Rs106bn. The quarterly adjustments pertained to the period between July 2016 and March 2019. The regulator decided the reconsideration request of KE multiyear tariff (MYT) 2017 for FY17 to FY23 (seven years) on July 5, 2018 that put average sale rate at Rs12.8172 per unit.

The ECC would also take a decision on “policy guidelines with respect to sale price of RLNG” to pass on Rs73.848bn to consumers of Sui Northern Gas Pipelines Ltd (SNGPL) against RLNG quantities it diverted to residential consumers between December 2018 and March 2019 because of local gas shortages.

Published in Dawn, July 3rd, 2020