Wednesday September 22, 2021

Paradigm shift: Govt to cut industrial power tariff by Rs6 per unit

October 17, 2020

ISLAMABAD: The government will slash the power tariff primarily for the industrial sector to almost Rs13 per unit from Rs Rs18 per unit, aiming to utilise the idle capacity of electricity and put the country on its way to industrialisation. This initiative is to be applied to the large scale manufacturing industry round-the-clock the whole year. This will be a win-win decision both for the government and industrial consumers.

The large scale manufacturing industry is located on high energy transmission lines having no line losses. The government wants the country's industrial sector to utilise electricity at the maximum, so it will not only make local investors further expand their industrial operations but will also help increase economic activities in the country generating more jobs.

"We are also brainstorming the option to erase the peak hour tariff of domestic and commercial consumers having ToU (time of use) meters. ToU consumers pay the peak hour tariff of over Rs20.7 per unit and normal tariff of Rs14.38 per unit. We are also examining the option to reduce the tariff for Small Medium Enterprises (SMEs) but these are mostly located on the distribution system where in-line losses are at the higher side. But these two options are not yet finalised. However, the government has decided to lower the industrial tariff to give an impetus to economic activities across the country," one of the special assistants to the prime minister told The News.

The country currently possesses the installed capacity to generate electricity more than 36,000MW. However, out of the 36,000MW installed capacity, the de-rated capacity stands at 29,000MW. During the peak summer season, the maximum utilization of electricity stands at 23,000-25,000MW, which tumbles to 12,000-13,000MW in the winter season and sometimes it reduces to 8,000-9,000MW. Owing to this every reason, the capacity charges payment trap has aggravated and the government has to pay in this financial year a whopping Rs800-900 billions to the IPPs alone in the head of capacity charges, which will alarmingly swell to more to Rs1,500 billion in 2023, as more power projects will come on stream by that time.

The government wants to bring a paradigm shift in the current power tariff regime, which was conceived and implemented when the country was in deficit of electricity. The tariff regime was implemented mainly to discourage the use of electricity in order to save and conserve electricity but now the scenario has changed and about 12,000 MW of electricity has been added to the system during the last PML-N era, making the country having surplus electricity. So the government has decided to utilize the maximum electricity and to this effect it is going to incentivise the industrial sector to utilize the electricity at the maximum round-the-clock for the whole year. This will not only help increase the ability of the government to pay capacity charges but will also help the government to increase the revenue.

“We have decided to recover the cost of electricity and sell the product to the industrial sector with marginal increase at about Rs13 per unit (8 cents per unit) and will not charge the existing tariff of Rs18 per unit, which is currently implemented for B2 and B3 (industrial consumers)." The official said that the government would recover 20-25 paisa per unit in the head of capacity payments from the industrial consumers.

Currently, the government is extending the electricity tariff to the export industry at 9 cents per unit which will go down to 8 cents once the proposal of the Power Division is approved. The prime minister has already in principle accorded approval to reduce the electricity tariff for putting the country on the way to industrialization and dealing with the monster of capacity payments also.