PM’s directives disregarded: ECC decides to slash industrial power tariff by 30pc

ISLAMABAD: While disregarding the directives of the prime minister for reducing the power tariff for industrial sector, especially for Small and Medium Enterprises (SMEs) by 50 percent, the ECC on Monday decided to partially reduce the power tariff in the range of 25 to 30 percent.

The ECC left its final approval with the cabinet that is scheduled to meet on Tuesday (today) under the chairmanship of Prime Minister Imran Khan for the final decision. The ECC has also directed the Power Division to fine-tune categories of its different slabs before presenting it to the federal cabinet. The Ministry of Finance did not issue any official press statement after the ECC meeting held on Monday. However, official sources confirmed that the ECC reiterated its decision to fix the power tariff at Rs12.96 per unit against an average per unit cost of Rs16 per unit for industrial sector with special focus on the SMEs sector. The ECC also recommended taking into account the power tariff of K-Electric because its average tariff stood at Rs18 per unit and against that backdrop a further subsidy to bring down the industrial sector’s tariff would be required.

Adviser to the PM on Finance Dr Abdul Hafeez Shaikh was uncomfortable with the concessions for the SMEs when the summary was put before the ECC without the required spadework. He emphasised that without calculating proper slabs for determining the tariff, the ECC cannot decide on the basis of half baked information.

Earlier, the PM Secretariat had instructed to bring down the power tariff for industrial sector and other consumers from Rs16 per unit to Rs8 per unit that required massive subsidy ofRs234 billion. Then the ECC pondered upon different proposals and recommended to slash it from Rs16 per unit to Rs12.96 per unit for the remaining period of eight months of the current fiscal year. “In that scenario, we have estimated that the government would have to provide an additional subsidy of Rs15 billion for the remaining 8 months,” said official sources.

Interestingly, the ECC in its meeting held on October 26, 2020 had granted approval for the sale of surplus power available at the incremental rate of Rs. 12.96/kwh to all industrial consumer categories, excluding zero-rated industrial consumers, on the incremental consumption over their respective historical consumption or established benchmark. The ECC also formed a committee consisting of Dr. Ishrat Hussain, Dr. Waqar Masood, Federal Minister for Industries and Production Hammad Azhar, Federal Minister for Power Omer Ayub, SAPM Nadeem Babar and SAPM Tabish Gohar to prepare a proposal to include K-Electric in the package. It will also recommend whether this package shall continue for one year or be expanded to three years. The committee will also analyse the need for any subsidy in the package and source for arranging the same and all the issues that may come up in the calculation and distribution of that subsidy.

The official sources believe that the federal cabinet would take the decision keeping in view all pros and cons and it might grant approval of the power tariff for SMEs at Rs10 per unit. This would require a countrywide subsidy of Rs6 per unit, while the K-E consumers at an average subsidy might avail subsidy at Rs8 per unit. The cabinet’s decision would also come in view of the IMF conditionalities as doling out untargeted subsidies might put the halted IMF program into a more dangerous zone.