Govt agrees to pass withheld power tariff raise on to consumers

The government has reportedly agreed to pass the withheld determined power tariff increase of Rs 1.39 per unit to consumers in phases, well informed sources told Business Recorder.

This understanding has reportedly been reached between Pakistani authorities, International Monetary Fund (IMF), World Bank and Asian Development Bank (ADB).

The sources said Finance Minister Shaukat Tarin, who is reaching Washington for talks with IMF will be carrying the message that the government will raise tariffs.

Previously, Prime Minister Imran Khan and Tarin openly opposed any increase in base tariff as according to them neither industry nor other categories of consumers were able to bear the brunt.

However, the rigid stance of IMF and World Bank compelled the government to back out from its earlier stance.

The government, the sources said, is waiting for the determinations of Discos’ annual tariff petitions, after which it would decide how much increase in base tariff would be passed on to the consumers.

The sources said the government has to, in addition, increase base tariff by Rs 1.50 per unit due to capacity payment of Rs 200 billion of newly coal-fired power plants.

According to the sources, as the agreement is reached between the Government and IMF in Washington, the new Circular Debt Management Plan (CDMP) will be finalised.

Pakistan had pledged during the second to fifth review staff level talks held in February 2021 that tariffs would be raised by Rs 1.39 per cent from June 1, 2021 as the second phase of Nepra’s determined tariff of Rs 2.34 per unit of which Rs 1.95 per unit has already been notified earlier this year.

The country’s circular debt reached Rs 2.234 trillion as of August 21.

IMF, the sources said, has also expressed displeasure at the decline in recovery in FY 2020-21 as compared to FY 2019-20.

In the previous CDMP, government had pledged to the lenders that it would increase tariff by Rs 5 per unit by 2022.

Power Division; however, has also agreed on subsidies phasing out plan, with the nod of NEPRA.

Power Division had worked out a subsidy of Rs 501 billion for FY 2021-22 but Finance Ministry earmarked Rs 330 billion, which implies a difference of Rs 171 billion will now become part of circular debt.

The PTI government has already increased tariff by over 40 per cent during the last three years, which has multiplied the woes of common man. In August 2021, Rs 44 billion have been added to the circular debt, of which Rs 21 billion relate to unpaid subsidy, Rs 10 billion to unbudgeted subsidy, Rs 5 billion to IPPs interest charges on delayed payments, RS 3 billion to PHPL mark up, Rs 16 billion to pending generation cost, Rs 13 billion to non-payment by KE, Rs 27 billion to Discos losses/ inefficiency, and Rs 40 billion to Discos under recoveries.

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