Nepra approves subsidy rationalisation plan for electricity consumers
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ISLAMABAD: The National Electric Power Regulatory Authority (Nepra) on Thursday approved the first part of three-phased subsidy rationalisation plan of the government, envisaging creation of four new tariff slabs and a slight expansion in the definition of lifeline consumers to 100 units per month for gradual reduction of subsidies.
The new slab mechanism would lead in the next and third phase to the imposition of higher electricity rates and surcharges in a gradual manner or subsidy payments to lowest income groups through the Ehsaas cash cards. The subsidy rationalisation plan has been agreed to with the lending agencies — the World Bank and the International Monetary Fund — would help facilitate upcoming negotiations with the fund on power tariff reforms.
The regulator “accepted the request of Ministry of Energy (MoE) for rationalisation of subsidies as the government presented their vision of provision of subsidies through Ehsaas Programme by linking residential electricity meters with CNIC s, as it will become possible to use Ehsaas socio-economic registry for provision of electricity subsidy”, a Nepra statement said.
The regulator also directed the MoE to ensure provision of detailed workings including financial impact on each category of consumers at the time of submission of Phase-II and Phase-III for approval.
New slab mechanism will lead to gradual imposition of higher power rates
Under the decision, the existing 301-700 unit slab has been divided into four slabs of 100 units each and the definition of lifeline consumers has been changed. The mechanism will be applicable throughout the country including K-Electric.
Non-Time of Use (ToU) consumers have been bifurcated into two blocks of “Protected” and “Unprotected” categories and the 301-700 slab has been bifurcated into four slabs i.e. 301-400, 401-500, 501-600 & 601-700 with the same tariff. At this stage, there is no financial impact on the consumers.
The mechanism would ultimately help the government better target the subsidy to the really deserving and administered through Ehsaas Programme in next two phases. The process would be completed in five years.
The Prime Minister had approved the summary on “subsidy reform proposal” in February this year and then the ECC and the cabinet approved three phase proposals for subsidy reform.
Small residential consumers having maximum of last 12 months and current month’s consumption of 100 units would be redefined and given two rates i.e. Rs3.95 per unit for 50 units and Rs7.74 per unit for 100 units. A new category of protected consumers is to be created to include those consuming consistently 200 units per month for past six months.
Also, the category of 301-700 units has been divided into four — 301 to 400, 401 to 500, 501 to 600 and 601 to 700 units per month. Their existing tariff would remain unchanged for the time being but adjusted when the government takes a policy decision for tariff adjustment. Each of these slabs would continue to get the previous slab benefit of first 300 units.
About eight million consumers would exit the subsidy regime over the next two phases. Under the policy guidelines already approved by the government, the creation of new slabs in tariff would reduce the power subsidy by around Rs42 billion per annum. At present, 24.5m (99pc) electricity consumers are getting subsidy of varying degree. For example, the existing system protects 84pc consumption below 300 units representing 89pc domestic consumers which are about 22m.
However, it will be limited to 13.9m consumers, which will be only through the Ehsaas social welfare programme, following the implementation of reforms and to be paid in cash. Almost 19m consumers (76pc meters) fall in the protected zone just because their consumption is below 200 units in winters, according to the MoE.
Published in Dawn, September 24th, 2021
