Base power tariff to rise by Rs1.39 per unit

Published October 16, 2021
ISLAMABAD: Federal Minister for Energy Hammad Azhar and Minister of State for Information Farrukh Habib addressing a press conference on Friday.— APP
ISLAMABAD: Federal Minister for Energy Hammad Azhar and Minister of State for Information Farrukh Habib addressing a press conference on Friday.— APP

• No new gas connection to be allowed
• Move to ensure inflows from IMF, World Bank

ISLAMABAD: In a major move to revive inflows from the international lending agencies — IMF and the World Bank — the government on Friday announced a countrywide uniform increase in base electricity tariff and a moratorium on new gas connections in all ongoing schemes.

Addressing a news conference, Energy Minister Hammad Azhar said the decision to increase the base power tariff by Rs1.39 per unit was taken during a meeting between the World Bank management and Finance Minister Shaukat Tarin that he joined through Zoom link.

The minister said the increase in power rates had been necessitated by the expensive power projects contracted by the previous government — much beyond the country’s needs. “Yet, we have not increased tariff as much as the international lending institutions insisted,” he said.

The minister said the capacity payments contributing to circular debt stood at Rs185 billion a year in 2013, but increased to Rs470bn in 2018, hovered between Rs700 and 800bn at present and were projected to be around Rs2,500-3,000bn by 2030 because the projects were too expensive. He said the PTI government had not contracted a single project.

Without sharing numbers, the minister said the government had improved recoveries and reduced losses over the last two years but still there was a difference of Rs1.50-2 per unit between the cost of power and consumer tariff because the major contribution of about 80 per cent came from capacity payments, hence today’s Rs1.39 per unit increase, to be effective on Nov 1.

Mr Azhar said the National Electric Power Regulatory Authority (Nepra) wanted Rs3.35 per unit increase in March but the government did not allow it and instead increased only Rs1.95per unit. The remaining Rs1.39 per unit increase was delayed till now which would not be applicable to consumers using up to 200 units per month, accounting for almost 46 per cent of total consumers.

He said the decision had been referred to Nepra for notification.

In addition, the industrial support package was given to industrial sector about two years ago through elimination of peak rates and incremental power consumption on fixed rate of Rs12.96 per unit that was Rs5-7 per unit cheaper than normal rates. A similar seasonal tariff had now been offered to domestic and commercial consumers on incremental consumption, he said, adding the flat rate to industry had increased consumption by 15pc.

The minister said effectively the net tariff increase would be about Rs1.10 per unit because a 15 to 24 paisa per unit negative quarterly tariff adjustment was also expected to come into effect around same time.

Ban on gas schemes

Mr Azhar said the government had decided to put a moratorium on all ongoing schemes of new gas connections in the network of both Sui Southern Gas Company and Sui Northern Gas Company in view of depleting domestic gas flows and expensive imported gas.

He said the government would soon introduce amendments to the law to ensure weighted average cost of gas (WACOG) by putting together both imported and local gas and till such time no gas connection would be installed. “Until we have additional gas pipeline capacity and quantities, we will not announce network expansion and resumption of new connections for just few seats unlike the previous government,” he said.

He said the PML-N had announced a lot of new connections ahead of elections knowing well gas production was declining and coming government would have to complete these schemes. Those schemes not completed so far, including 450,000 allowed last year, had been put on hold for now, he said. “We will commit new schemes when we will have additional gas,” he said, adding the domestic gas production was depleting at the rate of 9pc and the government did not want to create another circular debt in gas sector like power sector.

Replying to a question, he said the government had not yet taken a final decision on gas tariff increase and hoped the introduction of WACOG would average out the need for gas tariff increase and would be staggered if it was unavoidable.

He said not only the gas production was declining but additional demand was also coming up because of new schemes.

He the government would soon change the priority order for gas supply by prioritising fertiliser sector. He conceded that 10 cargos each had been arranged for November and December instead of 12 in routine but said maximum efforts would be made to maintain supply situation at last year’s level instead of further shortage. “Gas loadshedding would more or less be of the same as last year,” the energy minister said. He said the combination of WACOG and construction of North-South Gas Pipeline and two additional terminals would gradually help address the gas sector challenges.

He said piped gas was available to no more than 28pc of population while remaining 70pc was dependent on alternative fuels. The gas companies could pump only 1200-1300 million cubic feet a present and the government had decided to meet requirements of industry and fertiliser plants, he said.

Published in Dawn, October 16th, 2021

Follow Dawn Business on Twitter, LinkedIn, Instagram and Facebook for insights on business, finance and tech from Pakistan and across the world.

Opinion

Editorial

Budget for stabilisation
Updated 13 Jun, 2024

Budget for stabilisation

The proposed steps lack any “disruptive policy changes", especially to "right-size" the govt, and doubts remain on authorities' ability to enforce new measures.
State of the economy
13 Jun, 2024

State of the economy

THE current fiscal year is but another year lost. Going by the new Pakistan Economic Survey, which maps the state of...
Unyielding onslaught
Updated 13 Jun, 2024

Unyielding onslaught

SEVEN soldiers paid the ultimate price in Lakki Marwat on Sunday when their vehicle was blown up in an IED attack,...
X diplomacy
Updated 12 Jun, 2024

X diplomacy

Both states can pursue adversarial policies, or come to the negotiating table and frankly discuss all outstanding issues, which can be tackled through dialogue.
Strange decisions
12 Jun, 2024

Strange decisions

THE ECP continues to wade deeper and deeper into controversy. Through its most recent decision, it had granted major...
Interest rate cut
Updated 11 Jun, 2024

Interest rate cut

The decision underscores SBP’s confidence that economic stability is gaining traction.