On the demand of the International Monetary Fund (IMF), the National Electric Power Regulatory Authority (Nepra) has announced a significant raise in electricity base tariff for the current fiscal year 2023-24, allowing Rs4.96 per unit increase
ISLAMABAD: On the demand of the International Monetary Fund (IMF), the National Electric Power Regulatory Authority (Nepra) has announced a significant raise in electricity base tariff for the current fiscal year 2023-24, allowing Rs4.96 per unit increase.
The decision will lead to a collection of Rs3.281 trillion from power consumers across all distribution companies. The government is also working on the increase in gas rates as the Oil and Gas Regulatory Authority has already determined a 45-50 percent increase in gas prices on June 2, 2023.
The implementation of the decision on the power tariff hike is set to begin on July 1, with the tariff rising to Rs29.78 per unit from the current Rs24.82/unit. The consumers, who use the ToU (time of use) meter, would pay up to Rs49.35 per unit. They will now pay Rs49.35 per unit during peak hours from 5 pm to 11 pm and Rs33.03 for out-of-peak hours.
The decision has become double jeopardy for Karachiites as Nepra has also increased the monthly fuel charges adjustment of the month of May by Rs1.44 per unit, which will appear in the billing of July.
However, the increase in base tariff will be passed on to all categories differently. Some categories will face less increase and some more, may be up to Rs6 per unit, depending upon the decision of the government. Nepra has determined the average increase in base tariff by Rs4.96 per unit.
Apart from the new base tariff of Rs29.78 per unit, the end consumers will also pay a financing cost surcharge of Rs3.23 per unit from July 1 to generate Rs335 billion to finance the power sector’s debt and liabilities, which stands at Rs2.6 trillion. In addition, they will also continue to pay the Tariff Rationalization Surcharge, which is at Rs0.47 per unit.
In the increase of base tariff of Rs4.96 per unit, the capacity charges payment’s share has increased to 70 percent, which is 3.472 per unit and 30 percent is energy price. The new base tariff increase has been calculated at a dollar value of Rs287 and inflation at 17 percent and electricity generation growth at seven percent. The consumers will pay capacity charges in the tariff of Rs1.874 trillion, which was at Rs1.251 trillion in 2022-23.
The end electricity consumer in Pakistan is virtually being fleeced to cover up the unending inefficiencies in the power sector as apart from paying the actual cost of electricity, they are also being charged tariff rationalisation, financing cost surcharges, electricity duty, PTV license fee, GST, income tax, extra tax, further tax, and sales tax. A consumer actually pays 31 percent in addition to the actual cost of the electricity in the shape of surcharges, duties and taxes.
Electricity Duty, a provincial duty, has been levied on all consumers ranging from 1.0 percent to 1.5 percent of Variable Charges, General Sales Tax (GST) is levied under Sale Tax Act 1990 on all consumers at the rate of 17 percent of the electricity bills.
Income Tax is charged from consumers who are non-taxpayers at various rates depending upon applicable tariff and the amount of electricity bill and five percent to commercial consumers on bills up to Rs20,000 and 7.5 percent on bills exceeding Rs20,000.
Further Tax is being charged at the rate of three percent from all consumers -- having no Sales Tax Return Number (STRN) except domestic, agriculture, bulk consumers, and street light connections. Income Tax is charged from consumers at various rates depending upon applicable tariff and the amount of electricity bill and five percent to commercial consumers on bills up to Rs20,000 and 7.5 percent on bills exceeding Rs20,000.
The increase in power tariff was a crucial requirement imposed by the IMF in order to provide financial assistance to Pakistan. The IMF has consistently urged the government to raise the tariff and eliminate power subsidies as part of efforts to reduce the country’s fiscal deficit. However, Nepra attributes the tariff increase to factors such as low sales growth, rupee devaluation, high inflation, exorbitant interest rates, and the addition of new capacities. The projected total revenue requirement for XWDISCOs in the fiscal year 2023-24 is estimated to be Rs3.281 trillion, with projected sales of 110,165 GWh. During the previous financial year, the base tariff was increased by Rs7.91 per unit, impacting Rs2.8 trillion, but it was implemented in three stages at intervals.
Meanwhile in Washington, the IMF said that steadfast implementation of policies was “critical” for Pakistan to generate the required aid amount and stabilise the economy over nine-month period for the success of the new $3 billion programme. IMF’s Director Communication Julie Kozack said in the press briefing in Washington that resolving Pakistan’s structural challenges will likely require continued reforms over the medium term to underpin the needed economic transformations, strengthen inclusive growth prospects, and create an environment conducive to renewed private capital inflows.
She said that the standby [arrangement] is aimed at supporting the authority’s immediate effort to stabilise the economy and to ensure that the current balance of payments need is filled. While it is relatively a short programme, it provides time for Pakistan to implement policies critical to strengthening its domestic and external economic situation, thereby supporting sustainability.
Julie Kozack said the immediate disbursement reached about $1.2 billion. The new programme will anchor the authorities’ immediate efforts to stabilise the economy. With due protection for the most vulnerable, it will provide a framework for financing from multilateral and bilateral partners to support the Pakistan government’s policies. Steadfast policy implementation is critical in the period ahead. This will be critical for the success of the programme and, of course, ultimately, for aiding and supporting the people of Pakistan. “We at the IMF always stand ready to work with Pakistan and the Pakistani government on these efforts to restore sustainability and economic stability,” she added.