Fuel price adjustment: Govt plays a trick, holds back tariff cut for industries

Tries to make up for revenue loss caused by earlier tariff reduction

ISLAMABAD:

The government appears to have played a trick with the industrial consumers of electricity as on the one hand it has reduced the tariff for them, but on the other hand it is reluctant to pass on the price cut on account of monthly fuel price adjustment, sources say.

This strategy will help the government make up for the revenue loss following a reduction of Rs3 per unit in power tariff for the industries.





Prime Minister Nawaz Sharif had announced this tariff relief to give an incentive to the industrial consumers during the 39th Annual Export Awards organised by the Federation of Pakistan Chambers of Commerce and Industry in Karachi on December 28, 2015.

However, the Economic Coordination Committee (ECC) in a meeting on January 28 decided that the benefit of fuel price adjustment would not be transferred to the industrial consumers until the tariff was notified for power distribution companies for the current fiscal year.

Meeting participants told the ECC that the European Union had granted Generalised Scheme of Preferences (GSP) Plus status to Pakistan, which provided certain Pakistani products duty-free access to the European market.

In addition to other facilities and in an effort to push businessmen to step up their exports, the prime minister later announced a cut of Rs3 per unit in the base electricity tariff. This was aimed at helping the industries compete effectively with their counterparts in other countries.



Until now, they said, the National Electric Power Regulatory Authority (Nepra) had set consumer tariff for the Faisalabad Electric Supply Company (Fesco) only. However, the company did not accept it because of “non-coverage of adequate revenue quantum”.

Other distribution companies have not yet received the new consumer tariff for the current fiscal year.

According to them, Nepra’s new tariff will be needed for implementing the prime minister’s directive comprehensively.

The Ministry of Water and Power proposed a reduction of up to Rs3 per unit in the existing base tariff for industrial consumers and called for maintaining a uniform tariff rate.

However, it suggested that the benefit of fuel price adjustment may not be passed on to the industries. It argued that the subsidy because of the cut in the industrial base tariff was expected to be offset against the monthly fuel price adjustment for the respective period.

The ministry asked the ECC to issue policy guidelines to Nepra and stop it from passing on the impact of fuel price adjustment to the industries.

Meanwhile, the Ministry of Water and Power notified the cut of Rs3 per unit in the tariff for industrial consumers and issued instructions to the distribution companies including K-Electric in this regard.

Under the directives, the companies will receive electricity bills from the industrial consumers at the reduced tariff rate with effect from January 1, 2016.

Published in The Express Tribune, February 5^th,  2016.

Like Business on Facebook, follow @TribuneBiz on Twitter to stay informed and join in the conversation.