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December 4, 2020

ECC removes ‘peak hours’ electricity rate

Business

December 4, 2020

ISLAMABAD: The government on Thursday decided to abolish the electricity tariff structure with different billings based on peak and off-peak hours for industrial consumers for six months.

However, the Economic Coordination Committee (ECC) of the cabinet did not approve any subsidy amount for implementing the new tariff structure, the official spokesman of the ministry of finance told The News.

“It has not yet been worked out how the subsidies will be provided,” said the spokesman.

The subsidy amount is estimated between Rs15 to 16 billion.

The abolishment of peak and off-peak tariff structure will be implemented with effect from November 1, 2020 till April 30, 2021, according to an ECC decision during a meeting presided over by Adviser to the Prime Minister on Finance and Revenue Hafeez Shaikh.

“ECC accorded approval, in principle, to the proposal regarding amendment in the respective statutory regulatory orders both for the ex-Water and Power Development Authority power distribution companies and K-Electric to charge the off-peak rates against the peak hours,” the finance ministry said in a statement.

“The underlying rationale is to incentivise industrial units to operate round the clock and produce greater output during testing times.”

The power division presented the case for abolishment of time-of-use tariff scheme for industrial consumers to spur industrial activity amid COVID-19 pandemic by removing the distinction between the current system of peak and off-peak hours as a part of the industrial support package.

Last month, the government announced a package for industrial sector with special focus on small and medium enterprises for providing electricity at 50 percent reduced rates.

The finance ministry’s official said capacity charges are paid and with possibility of additional utilisation of electricity the generated revenues would help to offset the subsidy amount to a certain extent.

“But the exact details of whole mechanism could only be determined after ascertaining exact demand of additional electricity,” he said.

Pakistan’s installed capacity of power increased with induction of 10,000 megawatts produced by power plants under China-Pakistan Economic Corridor framework. The government wants to utilise the surplus electricity for boosting sluggish economic activities.

Under the package, the power tariff will be charged at 50 percent reduced rate in the range of Rs8 per unit on usage of additional electricity. The relief package has been envisaged for three years. During peak hours, electricity cost for industries increase 25 percent and this practice has been going on for many decades. Now, industries will be able to avail off-peak rates for 24 hours.

Industries that make additional use of electricity will get an added 50 percent off per unit till June 30 next year. Across the entire industrial sector for the next three years, a 25 percent discount will be given for utilising additional electricity as compared to the same period last year, according to the industrial support package.

Large scale manufacturing sector grew 4.8 percent between July and September in the current fiscal year from a year ago. In 2019/20, the LSM output fell 10.17 percent. Now the government wants to spur the economic growth in months ahead.