Inflated power bills: IMF says no to tariff adjustment, additional subsidy

ISLAMABAD: Amid the IMF’s serious objections to the government’s proposal to provide relief to the poor people against the inflated power bills, Pakistan has requested the global lender to allow the staggering of upcoming quarterly tariff adjustments (QTAs) and Fuel Price Adjustments (FPAs) of Rs7.50 per unit over the next four to six months.

The Fund has ruled out the possibility of any tariff adjustment or provision of additional subsidy after the government’s claim that their collection of bills for August had reached close to the expectations.

“However, Pakistan has requested the IMF for staggering of QTA and FPA over a period of four to six months so it may also require some additional cost on which both sides will have to agree upon,” top official sources confirmed while talking to The News on Monday.

Official sources said the power sector woes continued to persist in the wake of QTA’s requirement of raising tariffs in the range of Rs5 per unit in the ongoing month and FPAs to the tune of Rs2.72 per unit. So in totality, a tariff hike of over Rs7 per unit is on the cards.

The QTAs will be worked out on the basis of losses of April-June period on account of reduced usage of units, cost escalation of interest payment and exchange rate fluctuations.

The FPA is calculated for surge in prices of imported fuel so in totality Rs7.50 per unit hike in the prices is on the cards for being incorporated in September bill with the consent of the regulator.

Now the power ministry high-ups claim that their bill collection has improved for August 2023 reaching close to the expectations. They argue that they would have to request for staggering of QTAs and FPAs to the IMF in order to bring the inflated bills down.

According to workout of electricity bills for different categories done by the power ministry, power charges for those using 400 units would be reduced from Rs21000 in August 2023 to Rs16963 in September and Rs11356 in October after incorporating QTAs and FPAs. Similarly, the charges for those using 300 units would be reduced from Rs13000 in August to Rs10,000 in September and Rs8000 in October 2023. After October, the winter will kick-start so the issue of hiked bills was expected to be resolved.

The official further said they were going to ask the Nepra to determine the next tariff adjustments keeping in view seasonality trends in mind because usage in summer months peaked but dropped in winter so the adjustment of tariff should be done keeping in view this seasonality trend.

APP reports: In a related development, caretaker Prime Minister Anwaar-ul-Haq Kakar Monday directed immediate action against those involved in power theft and asked the relevant authorities to submit reports in this regard on daily basis.

Chairing a meeting, the prime minister also directed a swift action against the defaulters, saying there should not be any leniency towards the power thieves and defaulters.

The prime minister was briefed in detail about all sections of the energy sector. The meeting was informed about the total installed capacity, actual generation and overall energy supply during various seasons.

The prime minister was also informed about the energy mix in power production.

Kakar stressed that in future, renewable and hydel sources of energy should be given top priority to produce inexpensive and green energy. He also directed effective measures to reduce line losses of the power distribution companies.

“A comprehensive plan should also be prepared and presented to implement the transformer metering project. Projects of small hydel power projects should be planned under the guidance of relevant experts. Such projects will not only generate low-cost electricity but also help in reducing the harmful effects of climate change,” he said, adding that the local coal should be preferred, instead of expensive imported coal in the coal power generation projects.

The prime minister also directed prompt launch of 2400MW solar power projects while ensuring transparency in the entire process. The government, he said, would take all possible steps to reduce circular debt of the power sector.

The meeting was also informed about the progress on establishment of electricity energy market in the country. The meeting was informed that with the establishment of energy market in the country, the performance and capacity of the power sector would be effectively increased that would eventually help 27 million domestic consumers.

It was also informed that most of the work by the Power Division had already been completed in this regard. Meanwhile, the prime minister Monday directed the Ministry of Finance to devise an effective strategy to bring economic stability in the country.

The prime minister said this in a meeting with Interim Finance Minister Shamshad Akhtar who called on him here. The finance minister also briefed the prime minister on the current economic situation in the country.

Kakar assured that his government was exploring realistic options to come up with out-of-box solutions to provide relief to electricity consumers. The prime minister, in an interaction with foreign media representatives, said the government would make informed decisions to satisfy the masses on the issue of electricity bills without deviating from the country’s commitments with the international financial institutions.

Mentioning the issues of circular debt, power theft and taxes, the prime minister said the government would introduce short-term solutions to the issue without undermining the agitating people.

He assured that the caretaker government was mandated to facilitate holding the general elections as early as possible while observing the constitutional obligations. He said the Constitution called for carrying out the delimitation of constituencies following the population census.

Kakar said without redesigning the government structure, the interim setup was mainly focused on rearranging the fiscal and monetary policies to build an edifice for economic revival.

Calling the Special Investment Facilitation Council (SIFC) a strategy for economic revival, he said it focused on agriculture, mines and minerals, defence production and information technology.

However, he also spelled out the economic reform agenda of his government, saying that the imminent steps included the privatization of two or more power distribution companies.

Responding to a query, the prime minister said the government had an “excellent working environment” with the Pakistan Army and both were working together, also for economic revival.

Kakar said regardless of any political association, the people of Balochistan welcomed every project under the China-Pakistan Economic Corridor which had entered the second phase. Meanwhile, caretaker Minister for Energy Muhammad Ali said the power prices won’t come down until a cut in the price of petrol and dollar’s depreciation against the rupee.

Talking to foreign journalists at his office, Kakar said Saudi Arabia and the Middle East would invest in projects worth $25 billion each in a span of two to five years.

The premier, , said that his government without “redesigning the government structure” is mostly focused on “rearranging the fiscal and monetary policies to build an edifice for economic revival”.

While labelling the Special Investment Facilitation Council (SIFC) a strategy for economic revival, he said the body would focus on agriculture, mines and minerals, defence production and information technology.

Responding to a question, PM Kakar said his interim government had an “excellent working environment” with the army and both were working together on economic revival.

On the China-Pakistan Economic Corridor (CPEC), Caretaker PM Kakar said regardless of any political association, the people of Balochistan welcomed the projects taken under the initiative. He reiterated the government’s resolve to go to any extent to protect the Chinese workers taking part in the CPEC projects.

Referring to the massive reserves worth $6 trillion of copper and gold in Balochistan, the prime minister said the Reko Diq project was about to start soon. He called for all the stakeholders to formulate a model to explore the mineral-rich area to make the world see Pakistan through a different prism.

Talking to the Capital Talk anchor Hamid Mir, Ali made it clear that provision of free power units to hundreds of thousands of Wapda and power distribution companies’ employees was a part of job contracts and except for them, no free power was provided to anybody.

The minister said compared with the last year, this year power would be supplied at lower rates for consumption of extra units.

He said during the year 2020, the then government had paid to the local power producers in rupees rather than in dollar and frozen the dollar at Rs148; otherwise, the country now would have been paying them at Rs300 to a dollar.

Ali said the agreements with the foreign investors could not be revoked unilaterally, as the country had already suffered much in the case of Reko Diq. To a question, he said problems like line losses and power theft could not be resolved overnight.

He further said there were five discos — Pesco, Qesco, Hesco and Sepco and Tesco — in Sindh, Balochistan and Khyber Pakhtunkhwa which were stealing 60 percent power or the outstanding amounts were not being recovered.