Saturday December 04, 2021

To resume IMF programme, govt hikes power tariff by Rs1.39 per unit

October 16, 2021
To resume IMF programme, govt hikes power tariff by Rs1.39 per unit

ISLAMABAD: To fulfil the International Monetary Fund (IMF) demand to stay in its programme, the government Friday increased power tariff by Rs1.39/unit with the federal cabinet approval.

The increase will become effective from November and continue till the end of the financial year, June 2022.

The tariff has been increased after the government withdrew Rs72 billion subsidy, which it was providing to various categories of power consumer. Now, the government has reduced the subsidy requirement from earlier Rs240 billion to Rs168 billion.

Economists are worried about this development, saying it will bring a high wave of inflation in the country, as already the commodities’ prices in international market including crude, petroleum products and food are on the rise.

Earlier, the government had promised it would not increase the tariff. But after ongoing negotiations with the IMF to resume the $6 billion stalled programme, the government had no options but to raise the power tariff.

The approval for increase was not given in a regular cabinet meeting, but it was circulated among the cabinet members, who individually approved it. This indicated that it was an extraordinary issue, and the government needed the approval on urgent basis.

Federal Minister for Energy Hammad Azhar, addressing a press conference along with State Minister for Information and Broadcasting Farrukh Habib here, said the increase of 1.39/unit had been made while keeping in view the ballooning power circular debt.

"We now have the capacity to generate enough electricity; therefore we want to increase the demand. We introduced an industrial package last year which has been successful as we have seen a 15% increase in its demand," he said. He added, “we have also seen a 6-7 per cent increase in the demand for electricity as the peak hours for the industrial sector have been removed.

He said that keeping in view the success of the package, the government decided to introduce another package known as the ‘seasonal electricity package’, under which consumers, who use an extra unit compared to their last year's usage, will get an extra discount. The government has also closed old generation companies (gencos), which are generating costly power. “But, despite all this, there is a difference between Rs1.5 to Rs2 in the rate at which the government is purchasing and selling electricity. This is the reason behind surging circular debt," he said.

"A major chunk of the circular debt is because of capacity payments. And because of the wrong decisions taken by the previous governments, we have to increase the power tariff," he said, adding that the government had proposed to NEPRA that the power tariff should be increased by Rs1.39 per unit. He said that this increase in tariff is not applicable to less than 200 unit/ month consumers. Hence, this increase is not applicable to 46 per cent of the consumer base," he clarified. It will also not affect the seasonal electricity package or the industrial package, minister said.