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Thursday March 28, 2024

Power tariff goes high by Rs1.27/ unit

By Khalid Mustafa & Mehtab Haider
December 20, 2018

ISLAMABAD: At last electricity tariff bomb exploded as Nepra on Wednesday announced the much awaited increase in power tariff by Rs1.27 per units with Rs130 billion per year burden on end consumers based on the consolidated accounts of electric power distribution companies (Discos) under the amended Nepra Act.

The tariff increase will be for high-end domestic consumers; big commercial and power and fertilizer sectors would range from 20 paisa per unit to Rs2.60 per unit and will vary among Discos. The raise in tariff will not affect those consuming up to 300 units per month.

However, the consumers using the ToU (time of use) meters will pay peak hours’ tariff at Rs20.78 and low peak tariff at Rs16.70 per unit.

However, Rs146 billion in the head of Net Hydel Profit has not been passed on to the consumers as the government has decided to arrange the said amount through loans that will be paid to Wapda for payment to provinces (KP and Punjab).

Earlier, the regulator had determined the raise in tariff by Rs3.82 per unit under differential tariff regime but after the enforcement of amended Nepra Act, the regulator had to come up with its new determination based on consolidated accounts under uniform tariff regime.

When the regulator came up with the increase in tariff by Rs3.82 per unit under differential power tariff regime on basis of capacity charges of Rs650 billion, the PTI government decided to increase the electricity tariff by average Rs1.27 per unit. In the ECC meeting the government decide not to pass the burden of Net Hydel Profit amounting to Rs146 billion to the consumers but after that it came to know that it would have to go Nepra again under amended Nepra Act and after regulator’s determination, the government will be able to notify the increase in tariff by Rs1.27 per unit. So the regulator on Wednesday announced its determination with increase in tariff by Rs1.27 per unit on an average with impact of Rs130 billion in a year.

The Uniform Tariff determined by the Authority includes impact of PYA (prior year adjustment) amounting to Rs226 billion, to be recovered in a period of twelve months from the date of notification of the tariff by the government.

However, the government set the tariff for agricultural consumers at Rs5.35 per unit instead of higher rates earlier while Rs3 per unit industrial support package was protected in addition to a flat $7.5 cent per unit rate for five zero-rated export sectors.

Meanwhile, Federal Minister for Finance Asad Umar disclosed that the government was considering introducing fresh money bill in Parliament next month for making adjustments in taxes and duties.

It will be consecutive third money bill in a financial year which Parliament is going to deliberate as the first budget was introduced by the last PML-N-led regime then the PTI-led government introduced mini-budget after coming into power and now third consecutive mini-budget is also on the cards.

“New money bill can probably be tabled in Parliament by early January under which the taxes and duties will be adjusted upward and downward in order to boost exports. These policy measures have recommended by the EAC,” Federal Minister for Finance Asad Umar told the Senate Standing Committee on Finance here at the Parliament House on Wednesday.

In order to curtail the budget deficit at desired level, the IMF wants additional taxation measures to bridge its yawning revenue shortfall during the current fiscal year. Different proposals are under consideration to jack up FBR tax collection in the remaining period of the current fiscal to reach close to Rs4,398 billion on June 30, 2019.

While briefing the Senate panel presided over by Senator Farooq H Naek, the minister for finance said that they wanted landing but not crash landing. “There is a proposal under consideration to increase taxes and tariffs but it’s being evaluated and no final decision has yet not been taken,” he added.

Senator Sherry Rehman of PPP said that the exchange rate movement showed that the policy of free float was under implementation at the behest of the IMF. However, the minister for finance replied that he was agreed to this extent that he was not backing on the IMF. “There are economic and political consequences attached to the IMF programme,” he added.

Regarding shattering of market confidence, the minister said that it was gossip of drawing rooms on economic matrix. The stock market, he said, tumbled by 5,000 points but stocks markets decreased in the region and other parts of the world as well.

SBP Governor Tariq Bajwa said on the occasion that exchange rate was determined by the market forces and on that specific day of November 30, market overreacted to the adjustment but this situation remained only for half an hour with one transaction of $2 million. The market, he noted, operates on two fundamental – macroeconomic fundamentals and market sentiments. He said that the exchange rate adjustment was done in consultation with the government.

The minister said that he knew possibility of movement into exchange rate but he or PM Imran Khan did not know about when and how much adjustment was going to take place on exchange rate front.

The minister for finance again stated that there was no urgency for getting the IMF loan as financing gap for the current fiscal year was already filled. “We have received $2 billion from Saudi Arabia out of promised $3 billion on rate of 3.18 percent and final instalment was expected to be received by next month. Saudi Arabia has committed oil on deferred payment to the tune of $274 million on monthly basis, he maintained. Discussions with China and UAE, he said, were still going on and these would yield positive results that could not be disclosed at this stage.

The minister said that Pakistan has submitted stabilisation plan to the IMF which wants to move ahead through video conferences and one is scheduled for Wednesday evening.

“We want an economically sound IMF programme that serves Pakistan’s interests and would not accept anything opposite,” said Umar, adding Pakistan will not get the IMF loan if the Fund’s programme entails reservations expressed by the senators.

The government needs to improve ease of doing business and tax reforms and both these issues are being addressed on priority basis. The government will make available gas at $6 per MMBTU and electricity at US 7.5 cents to the industry that has been complaining about high costs of gas and electricity, he further said, adding after these measures Pakistani exports will be able to compete regional exports in the international market.

The minister assured the committee that notification to provide electricity at 7.5 cents to zero-rated sectors will be issued any time and a mechanism to clear the pending refunds of Rs250 billions of sales tax and drawbacks of local taxes and levies is being developed as the government wants to put in place a system so that exporters do not need to pay visits to the FBR offices.

He said that Prime Minister Imran Khan had made a statement in 2014 about not going to the IMF and media has been running it recently and as far as going to the IMF is concerned, he claimed, “I stated on the face of IMF managing director it is unfortunate that Pakistan is going to the IMF.” He said he also stated to the IMF MD that this would be the last programme.

The minister stated that fiscal year 2017-18 was very bad for the economy as current account deficit was over $18 billion and major challenge for the new government was how to bridge the financing gap.