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Thursday March 28, 2024

Circular debt plan: Average power tariff to go up by Rs4 per unit from July 1

For slab users from 301 to 400 units, the tariff will go up from Rs14.78 per unit to Rs15.73 per unit, registering an increase of 0.95 per unit

By Mehtab Haider
February 15, 2022
For the consumers using electricity from 501 to 600 units, the prices of electricity will be increased from the existing tariff of Rs17.16 to Rs18.11 per unit, an increase by Rs 0.95 per unit.-File photo
For the consumers using electricity from 501 to 600 units, the prices of electricity will be increased from the existing tariff of Rs17.16 to Rs18.11 per unit, an increase by Rs 0.95 per unit.-File photo

ISLAMABAD: The revised Circular Debt Management Plan (CDMP), approved by the government, shows that the average consumer power tariff will go up approximately by Rs4 per unit with effect from July 1, 2022.

The revised CDMP envisages that there will be two accounts for raising the electricity tariff: rebasing of annual tariff and through withdrawal of subsidy for slab users from 101 units to 600 units on a monthly basis.

For users of 700 plus units, the average tariff will be standing at Rs22.22 per unit in the fiscal year 2022-23 with effect from July 1, 2022. The government will hike electricity tariff by Rs2.92 per unit with effect from July 1, 2022, because of annual rebasing as the first raise will be done by hiking Rs0.75 per unit in February 2022 and the second one to the tune of Rs2.17 per unit with effect from July 1, 2022.

There will be another increase in power tariff because of the withdrawal of power sector subsidy under the Subsidy Reform Phase-II envisaged under the IMF/World Bank conditions whereby the unprotected slabs of power tariff from 101 to 200 units will go up from Rs10.18 per unit to Rs10.36 per unit, witnessing a surge by Rs0.18 per unit.

For slab users from 301 to 400 units, the tariff will go up from Rs14.78 per unit to Rs15.73 per unit, registering an increase of 0.95 per unit. For slabs from 501 to 600 units, the prices of electricity will be increased from the existing tariff of Rs17.16 to Rs18.11 per unit, an increase by Rs 0.95 per unit. For power slab users of 700 units and plus, the tariff will remain unchanged at Rs22.22 per unit with effect from July 1, 2022.

According to revised CDMP, the power tariff will go up by Rs2.92 per unit on account of annual re-basing of the average tariff as Rs0.75 per unit will be hiked in February 2022, keeping in view higher devaluation of Pak Rupee against US dollar and another Rs2.17 per unit annual re-basing in coming July 2022.

However, this revised CDMP possessed major risks as the POL prices have increased manifold, so the prices of cash bleeding power sector may go up beyond Rs5 per unit at least in the wake of the country’s more reliance on the fuel-based power generation against revised CDMP for hiking tariff of Rs2.92 per unit. The POL prices stood at $75 per barrel at the time of preparation of the revised CDMP but now it has gone up to $95 per barrel in the international market. The fuel price adjustment had gone up from Rs1 to Rs4 in the wake of a surge in fuel prices in the international market.

"The annual rebasing of Rs2.17 per unit will increase the electricity prices in next fiscal mainly due to addition of new capacity in the system," the revised CDMP has estimated, which was approved by the government.

It also warned that with the baseline scenario, the consumer tariff will go up to Rs21.04 per unit during the next fiscal year (FY2023) from Rs18.99 per unit in the last fiscal year 2021. At the time of preparation of CDMP in FY2021, the average tariff of electricity stood at Rs16.44 per unit. In the revised plan for FY2022 and FY2023, the consumer rate will go up to Rs18.37 per unit at the end of PTI led regime five-year term, Rs18.09 per unit during the current fiscal year FY2022.

The plan envisages that all quarterly tariff adjustments and tariff determined for FY2021 to FY2023 have been notified as the quarterly tariff adjustment (QTA) for FY2020 of Rs0.83 per unit will enable the collection of Rs51 billion in FY2022 and Rs31 billion in FY2023. The notification of QTAs of FY2021 of Rs0.90 per unit in October 2021, Rs0.07 per unit, and Rs0.24 per unit will result in recovery of Rs37 billion in FY2022 and Rs20 billion in FY2023.

The notifications of QTAs for December 2021 at the rate of Rs0.32 per unit and Rs0.22 per unit in Feb 2022 will have an impact on the collection of Rs24 billion in FY2022 and Rs28 billion in FY2023. 

The notification of tariff-rebasing in November 2021 at the rate of Rs1.39 per kWh will result in improved collection of Rs86 billion in FY2022 and Rs 66 billion in FY2023. With a tariff hike of Rs 0.75 per unit in an ongoing month as annual rebasing in tariff, the CDMP envisages a collection of Rs23 billion in FY2022 and Rs62 billion in FY2023. With a tariff increase of Rs2.17 per kWh in July 2022, the CDMP plans improved recovery of Rs203 billion in the next fiscal year FY2023.