Power tariff likely to be hiked by another Rs3.5 per unit

The government of Pakistan, following its agreement with The International Monetary Fund (IMF) is likely to increase the power tariff by another Rs3.5 per unit, a local media outlet reported.

According to the report published, the Pakistan Tehreek-e-Insaf government plans to increase power tariff by Rs3.5 per unit by clubbing the impact of the hike in gas prices for the current fiscal year. The Power Division, as per the IMF’s condition, has imposed a quarterly automatic tariff adjustment it the power sector of 10 per cent to cope up with the circular debt by generating an additional Rs150 billion in the first half of FY 2019.

Moreover, the remaining adjustments costs are to be passed onto the consumers towards the end of August 2019. Meanwhile, electricity tariff schedule for FY2020 will be notified by the government towards the end of September 2019.

According to sources cited it the report, the Power Division has recently suggested a list of measures to reduce the line losses and circular debt to zero. It has been suggested that to stop further accumulation of debt due to the quarterly adjustments in the per-unit cost to the consumer, the per-unit cost should be kept between Rs12.98 per unit to Rs13.85 per unit in March 2019 and Rs15.31 per unit in June 2019.

Moreover, it has also been suggested that the debt flow for 2018-19 has been estimated at Rs223 billion, considering the Rs2.14 per unit additional tariff, meanwhile it has been projected at Rs97 billion (Rs 0.94 per unit additional tariff) for 2019-2020 after the initiatives, posing a considerable decrease. And in order to bring the flow to zero starting from FY 2019-20 in addition to quarterly adjustment notifications, an additional increase of Rs 0.94 per unit will be required.

Hence, the new total tariff will be Rs16.24 per unit instead of Rs12.98 per unit, indicating a net increase of Rs3.26 per unit, and this tariff adjustment is in addition to the monthly Fuel Price Adjustment (FPA) which will result in an increase of Rs1.5 per unit on the basis of gas supply at 824 mmcfd from July 1, 2019.

Meanwhile, on June 26, 2019, the Power Division had submitted the following proposals to the Economic Coordination Committee (ECC): (i) to notify National Electric Power Regulatory Authority’s (NEPRA) approved quarterly adjustments after incorporating the targeted quarterly subsidy and additional charge so as to fully protect the lifeline consumers, domestic consumers consuming up to 300 units per month and partially protect consumers consuming above 300 units including the domestic TOU category from price escalation.

For this purpose subsidy of Rs 54 billion was approved along with an additional charge of 31 paisa per unit maintaining uniform tariff on all category of consumers except lifeline and all domestic and agriculture consumers so that the consolidated revenue requirements pertaining to quarterly adjustments would be as approved and determined by NEPRA.