Power tariff for industry slashed: PM cuts petrol, diesel prices ahead of Eid

New prices of petrol and diesel after the reduction are Rs258.16 and 267.89 respectively

By Ag App & Khalid Mustafa
June 15, 2024
A representational image of a petrol station staffer updating fuel prices in Karachi. — AFP/File

ISLAMABAD: Ahead of Eid, Prime Minister Shehbaz Sharif on Friday slashed the prices of petrol and diesel by Rs10.20 per litre and Rs2.33 per litre respectively, the Prime Minister’s Office said on Friday.

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The new prices of petrol and diesel after the reduction are Rs258.16 and 267.89 respectively.

The decision was announced as day before the fortnightly revision, which was scheduled for June 15.

On June 1, the government had reduced the rate of petrol by Rs4.74 and the diesel price by Rs3.86. “So far, a relief of Rs35 rupees per litre of petrol has been provided to the public,” the PM’s Office said.

The relevant authorities had worked out the reduction in petrol price by Rs9.28 and in diesel Rs4.02 per liter. However, the PM Office announced to slice down the relief in the diesel price to Rs2.33 per liter and its impact has been shifted to petrol consumers in the shape of more relief of Rs10.20 per liter.

The federal minister of information MRr Ata Tarar says that the reduction in POL prices will be effective Saturday not from Sunday.

This is the fourth relief in the POL prices in a row from May 1, 2024

International oil prices are on the decline and the price of diesel in the international market is $90 per barrel and petrol $84 per barrel. The government may reduce the price of kerosene by Rs2 per litre to its new price of Rs169.61 and Light Diesel Oil (LDO) by Rs4.07 per litre to Rs153.25 per litre.

The prime minister also approved a massive reduction in electricity tariff for the industrial sector by Rs10.69 per unit in order to boost production and exports.

In view of the prime minister’s initiative, the new electricity price per unit for the industrial and export sector had now been fixed at Rs34.99, a PM Office press release said.

On the other hand, senior officials at the Power Division told The News that the National Electric Power Regulatory Authority (Nepra) has finalised the base tariff for FY25 at Rs5.72 per unit which will be implemented from July 1, 2024 to reap more than Rs3.6 trillion from the other power consumers in next fiscal year.

For industries Nepra recommended a reduction of Rs10.69 per unit.

“The PM’s package, which is expected to provide relief of over Rs200 billion to the industry, will help bring down the manufacturing cost of the goods making them competitive in the global market,” the PMO news release added.

Similarly, the initiative would also help decrease the prices of agriculture commodities.

“The step will likely to spur industrial growth, create new job opportunities, and stimulate economic activity,” it said.

The government reduced the electricity tariff for the export industry by ending the Rs200 billion cross subsidy which the industrial sector was earlier extending to the low-end consumers of electricity in the domestic sector.

The industrial sector was providing Rs240 billion as cross subsidy out of which Rs200 billion has been disallowed to the domestic consumers to reduce tariff for industrial sector to Rs34.99 per unit.

Now the tariff of the low-end consumers using the 100-300 units will be increased to some extent; however the government will give them some relief. However, the lifeline consumers will continue to enjoy the current status and their tariff will not be increased.

Nepra by toeing the guideline of the government has withdrawn the cross-subsidy of Rs200 billion which the industrial sector was forced to give to the low-end domestic consumers.

Meanwhile, in another blow to the nation, Nepra has finalised the base tariff for FY25 at Rs5.72 per unit which will be implemented from July 1, 2024, to unlock the new International Monetary Fund (IMF) programme of $6 to $8 billion.

“The Power Division has received the determination from Nepra over a hike in the base tariff for FY25,” the Power Division officials said.

For the outgoing FY24, the increase in base tariff was notified at Rs4.96 per unit which is why the base tariff was set at Rs29.78 per unit. Now the new base tariff for FY25 will increase to Rs35.50 per unit. The portion of capacity payments in the base tariff will increase to Rs22.72 from Rs17 per unit.

The Power Purchase Price (PPP) at which Discos purchase the electricity would increase from Rs20.60 to Rs26.32 per unit.

With the increase in base tariff of approximately Rs5.50 per unit, the peak hour tariff is likely to escalate to close to Rs48 per unit from over Rs42 per unit of domestic consumers who use ToU (time of use) meters and off-peak tariff may also increase accordingly. The average tariff of Rs35 may escalate to Rs40.72 per unit.

However, the power consumers will have to pay over Rs2.2 trillion just in the head of capacity payments in FY25. In the outgoing fiscal, the capacity payments of Rs1.87 trillion are to be paid.

The regulator has finalised the base tariff for FY25, but it will be notified once the government files the petition seeking uniform tariff across the country. The government may hold the presser in the days to come announcing the base tariff for FY25 and its modus operandi of not passing the tariff to lifeline consumers and low-end consumers using 200-300 units and increasing the recommended hike in based tariff and impact of delta loss to be created in the result of safeguarding the low-end consumers to high-end consumers.

However, it is the government’s prerogative not to increase the power tariff of consumers using up to 200-300 units given the budgetary allocation of Rs1.19 trillion for subsidy in the power sector for FY25, but the burden will be shifted to high-end consumers. In the budget for FY25, out of the proposed budgeted subsidy of Rs1.19 trillion, the government has earmarked Rs450 billion keeping the uniform tariff (Rs278 billion for inter-Disocs tariff deferential and Rs174 billion for KE as tariff differential subsidy).

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