ISLAMABAD, Sept 26: The National Electric Power Regulatory Authority (Nepra) has sought the federal government’s views on increasing power rates for lifeline consumers and other categories and the overall size of subsidy before making the final determination.

Sources said the implementation of separate tariffs for distribution companies of the Water and Power Development Authority had become so complex that a case was being prepared for a policy decision by the cabinet, because it involved a subsidy of about Rs30 billion per annum for at least five years.

This would be for the first time since the establishment of Nepra in 1997 that the cabinet would consider the power tariff issue, they said.

The sources told Dawn on Monday that Nepra had presented different scenarios about the proposed tariff increase in response to the government’s request for finalizing new power rates on the basis of cost of electricity supply.

The government had to decide now what should be the acceptable rate of losses to be recovered from the consumers and the subsidy and whether the tariff for lifeline consumers should be increased from the existing Rs1.40 per unit.

The sources said Nepra had finalized its calculations on tariff revision and informed the government that it would be on the basis of earlier determinations announced by Nepra.

They said the Nepra calculations revealed that a simple tariff revision might not be sustainable on social grounds for the Hyderabad, Quetta, Peshawar and Multan electric supply companies because of their higher number of agricultural and residential consumers.

Under an agreement with the World Bank, Nepra and the government are required to implement new tariff rates by Sept 30, but it seems difficult that the deadline will be met.

On purely economic grounds, the power tariff for all Wapda companies has been envisaged to increase by an average of five per cent or more than 20 paisa per unit.

Sources in the power ministry said Nepra was planning to give only a one-year tariff to the distribution companies on a trial basis to monitor its results instead of three-year tariff as demanded by the firms.

They said the government did not oppose the move because the distribution companies were not on the immediate privatization list.

Under various covenants with multilateral agencies, the country has to introduce a differential tariff for the companies to replace the existing uniform tariff as part of corporatization of Wapda and power sector reforms. The difference in tariff, arising primarily out of varying loss levels, would be picked up by the government as subsidy, the sources said.

The tariff announcement was pending because of delay in a decision by the ministries of finance and water and power as to how to provide subsidy to the loss-making companies to keep consumer tariff uniform across the country, the sources said.

The sources said Nepra had indicated to the power ministry that about five per cent increase in power purchase price from the National Transmission and Dispatch Company would be unavoidable because of rise in furnace oil price from Rs12,000 per ton to Rs18,000 and higher dependence on thermal power during the March-May quarter.

They said initial estimates suggested that four distribution companies in Punjab would remain in profit after the tariff revision but those of Quetta, Hyderabad, Peshawar and Multan would remain in loss and their tariffs would become unbearable if subsidy was not provided.

The ministries concerned, the sources said, were considering two options: the power ministry should retain a part of the profit of profitable companies in a pool and extend the amount in subsidy to the companies incurring loss, or the government should provide subsidy to the companies in loss so that their consumers are not burdened.

The sources said the dependence on furnace oil had reduced in June-August owing to better water availability, which was expected to remain so in the coming months.