Saturday July 02, 2022

Govt’s subsidy rationalisation plan to burden 8mln lifeline consumers

By Our Correspondent
August 11, 2021

KARACHI: Businessmen Group Chairman Zubair Motiwala on Tuesday rejected NEPRA’s subsidy rationalisation plan and the introduction of new category/slab of protected consumers based on average consumption of less than 200kWh, terming it a burden on 8 million consumers.

Motiwala, former president of Karachi Chamber of Commerce and Industry (KCCI), said the decision was taken to reduce the volume of subsidy at the behest of the International Monetary Fund (IMF), but this would affect the lives of the poor masses already hit hard due to the Covid-19 outbreak.

The chairman had attended Monday’s hearing where the government asked NEPRA to approve its three-phased subsidy rationalisation plan.

“The government has to realise that the IMF was not acquainted with ground realities. In today’s scenario, any further increase in KE tariff would only encourage more theft and pilferages,” he added.

After implementation of this decision, around 8 million consumers will be out of the subsidy net in the first phase, out of a total of 22 million electricity consumers, who were presently getting the subsidy.

Under the plan, if a consumer exceeded 200 units once during six months, they would not be classified as protected for a billing month, even if they consumed less than 200 units. Motiwala said this would be a huge strain on the poor, who struggle to even pay the electricity bills.

It was impractical and unjust to assume a slab based on 6 months’ average when the consumption widely varies depending on season, climate and occasion. In Karachi, summer usually stays around for seven months and in recent years, heat waves have become a common phenomenon, whereas consumption usually increases during festivals and family events too.

Residents on rent arrangements commonly tend to change their houses, which would burden the genuine poor consumers with higher tariffs for six months no matter how much they control their consumption, if their previous dwellers were consuming more than 200kWh, he explained.

He stressed that it was not the right approach, and instead demanded the government to mandate DISCOs, including K-Electric to provide solar panels with inverter to domestic consumers for day time self-power generation and charge the cost of the equipment in their bills over the subsequent two years’ time.

“This will reduce their consumption of electricity, resolve the issue of rising circular debt, reduce oil import bill, and will be a win-win situation for everyone.”

Speaking about power theft and line losses, Motiwala said the government should understand that power companies were recommending an easy way of increasing the rates and reducing subsidies.

“They don’t want to put more efforts to reduce theft and curtail the subsidies. They don’t want to reduce the technical line losses. They don’t want to introduce the modern ways of collection of charges like smart meters, wireless meters to large consumers and reduce supply by assisting small consumers in acquiring solar panels, which would be the better way to cope with the situation.”

He questioned what would be the net amount saved after taking this step, as the amount was not disclosed during the NEPRA hearing that clearly indicated lack of proper homework.

Motiwala further questioned if this subsidy, which was actually a cross subsidy being charged from the industry, was taken away, what would be the target utilisation of this imposition. “Would that reduce the tariff of the industry, which is burdened heavily with so many other factors or this will only go towards reducing the circular debt?”

He also reminded the government that circular debt has been created because of the high price of power purchased from the IPPs. He said the government should meet the price different from its coffers through the budget and not through cross subsidisation.

Industry, manufacturing sector and all other sectors could not bear more than what their competitors were paying. He said this whole exercise – NEPRA’s hearing on Monday and the two-year programme – would plunge the industry in an unviable situation.

“The government has to understand that price being borne by the competitors has to be taken into consideration and only then can we have a tariff which is acceptable and compatible with the competitors,” he added.