Undertaking extended to IMF: Govt will have to hike Re0.50 per unit in power base tariff

ISLAMABAD: In line with an undertaking extended to the IMF, the government will have to increase the base tariff by Re0.50 per unit within the ongoing financial year 2021-22 and the remaining increase will be passed on to consumers in the next financial year 2022-23, a senior official at the Energy Ministry told The News. Currently, the average base tariff of electricity stands at Rs16.25 per unit, which will jack up to Rs16.75 after the increase by Re0.50 per unit by end of June 30, 2022.

However, he said, after Re0.50 increase in the base tariff, there will still be a gap of Rs1.50 per unit between the base tariff and cost of electricity and they will try to bridge some portion of this gap through reforms and increasing the efficiency in terms of recovery and reducing line losses.

However, the consumers who use ToU (time of use) meters are currently paying the off-peak tariff of over Rs18 per unit and peak hours’ tariff of Rs24.33 per unit, which will also increase accordingly once the Re0.50 per unit is hiked in base tariff.

When his attention was drawn towards the circular debt that has swelled to Rs2.5 trillion, he said the Power Division has succeeded to rein-in the unbridled hike and limited the annual flow of Rs150 billion in circular debt. He said the government has carved out a plan not only to reduce the flow in circular debt but from June this year, the government will also start reducing the stock of the circular debt. He also said that the capacity charges have emerged as a major threat to the sustainability of power sector as these have increased from Rs400 to Rs800 in the current financial year.

However, right now, 33 percent of bills of end consumers comprise taxes and surcharges in addition to electricity duty and PTV fee. In the electricity bills, the consumer is currently paying the Financing Cost (FC) surcharge of 43 paisa per unit to ensure collection of Rs30-32 bn for debt servicing of the loans parked at the Power Holding Private Limited taken for the power sector. The consumer also pays Tariff Rationalization (TR) surcharge of Rs1.43 per unit to reduce the overall power subsidy on the budget and to keep the tariff uniform across the country through cross-subsidy. The government has done away with 10 paisas per unit Neelum-Jhelum Surcharge as the Neelum Jhelum Hydropower project has completed its CoD (commissioning of date). Apart from current surcharges, the consumers of various categories also pay in the electricity bills five taxes such as GST, income tax, sales tax, further tax and extra tax.