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November 9, 2019

Rs11.97 per unit power flat rate for winter announced


November 9, 2019

ISLAMABAD: Aimed at encouraging the industrial production, commercial activities and supporting domestic power consumers, the government announced Friday incentive package to supply them with electricity at the flat rate of Rs11.97/unit for winter.

This package is applicable from the current month till February 2020. However, it would not be applicable on all units a consumer is consuming, but on incremental units of the existing month over the same month of last year consumption.

Minister for Energy Omar Ayub Khan flanked by Federal Secretary Irfan Ali announced this package in a news conference, which the federal cabinet has recently approved.

While elaborating the package, the minister said if a consumer had consumed 100 units in month of November last year and now in same month of November this year it consumed 120 units, the 11.97/unit flat tariff would be applicable only on these 20 incremental units, while the 100 units would be charged with normal rate as usual.

This would also help the government in reducing the capacity payments that it paying to the power producers of billions of rupees, especially to private sector, which would ultimately lessen the burden on the circular debt, as idle capacity would come under use in winter.

This incentive package of flat electricity rate would be applicable for four months (November-February) and would also be available for residential and commercial consumers. This would help in ending slow down in economy and boost the industrial growth. To a question, minister said that this package can be expanded to other months too, once they get its [this four-month package] results. The government is also working on adding around 8,000MW renewable energy to the national grid by 2025, which would bring down the average power tariff.

He further said that Alternative Energy Development Board (AEDB) under the Power Division has also given approval for issuance of letter of support (LoS) to 11 wind power projects having combine power generation capacity 500MW. its cost in dollar term would be 4.3 cents or around Rs6.5/unit, minister said.

He said that it would encourage, especially the industrial sectors to boost their production by increasing their working shifts and also will help in jobs creation. It would also help in making Pakistani products competitive in international market and boost our exports.

Khan said that the government has estimated that this flat tariff regime would serve around 31 percent consumers. This constitutes 22 percent share of industrial sector, 4.22 percent residential (III-phase ToU) and 4.6 percent commercial consumers (III-phase). Through this package, around 1800 to 2000MW extra would go to these consumers. It would be 24-hour available to the consumers.

Minister said that the government has earmarked Rs226 billion subsidies for power consumers, especially for those who consume less than 300 units and which constitute 75 percent of the total consumers. Besides, agricultural tube wells and some commercial consumers are also enjoying subsidised rates.

Interestingly, when minister was asked about the settlement of the Karkey issue, minister did not reply, however said that the Attorney General can talk about it. However, he said, “It would be at ‘zero cost’”.

Secretary Irfan Ali said that in the past, they had energy shortage and now there is no such issue. And on the electric feeders where the power theft is zero, there would be no power outage. Since, they have sufficient installed capacity, so they want to pass its benefit on to the consumers. So, this flat rate has been announced for industrial, commercial and domestic consumers.

Normally, in these four months, hydropower generation reduces, but as the installed capacity is there of around 35,000MW, government would provide electricity to these consumers at the flat rate.

It is worth mentioning that during the first two months (July-August 2019) of this financial year, Large Scale Manufacturing (LSM) sector decelerated by six percent year-on-year. Electricity being the major input, this scheme would help boost production, but at same time, the higher interest rate is also hitting the businesses and industrial sector hard as they cannot afford to borrow from banks at higher rates.

The state Bank’s latest data also show that from July 1 to Oct 2019, credit to private sector stood at negative Rs36.75 billion [indicating that they retired debt instead of borrowing new loans] while in same period of the last year, credit to the sector was Rs202.84 billion.