Govt jacks up oil prices, cuts power tariff

An amount of around Rs20 billion will be refunded to consumers

Zafar Bhutta March 01, 2017

ISLAMABAD: The government on Tuesday offered some relief to power consumers by slashing tariffs by Rs3.36 a unit, but at the same time it jacked up fuel prices by Rs1.71 per litre.

The government waited for two weeks to increase rates after prices went up in the global oil market. According to the revised prices, a litre of petrol will now cost Rs73 instead of Rs71.29, while high speed diesel will cost Rs82 after an increase of Rs1.52 a litre.

The government made a partial increase in the price of motor oil and absorbed some impact of the proposed increase by adjusting tax rates.

The prices of kerosene oil and light diesel oil have also been increased from Rs43.25 to Rs44, and from Rs43.34 to Rs44 respectively.

Finance Minister Ishaq Dar said the government would have to bear a burden of Rs3 billion to maintain the new prices.

At present, consumers are charged two types of taxes — petroleum levy and general sales tax.  The government had also made a partial increase in prices of petrol and high speed diesel from February 16. However, no raise had been made in the prices of kerosene oil and light diesel oil. The government is collecting Rs30 billion a month on account of GST and Rs10 billion on account of petroleum levy.

NEPRA tariff

The National Electric Power Regulatory Authority (Nepra), meanwhile, decided to reduce tariff by Rs3.36 per unit on account of fuel adjustment for January 2017. However, agricultural and K-Electric consumers, along with those domestic households that consume less than 300 units a month, will be exempt from this relief.

The Central Power Purchasing Agency had asked Nepra to reduce the tariffs by Rs1.62 per unit. Nepra’s decision came after a monthly public hearing on Tuesday.

Due to the tariff cut, an amount of around Rs20 billion will be refunded to consumers. The reduction in actual generation cost came mainly due to a dip in global oil prices. The CPPA said the actual generation cost was lower and hence, extra money collected from consumers needed to be refunded through adjustment in the next billing cycle.

In January, the CPPA had reported that almost 48% of power generated came through plants powered by furnace oil, 13.5% through gas-run plants and 5.24% through diesel-based plants.

It was informed that furnace oil and diesel contributed more towards power generation than hydel resources due to the closure of canals during winter.

The CPPA said that transmission and distribution losses stood at 3.8% which were higher compared to the benchmark set by the regulator.

Pending issues

The CPPA also pleaded to Nepra to adjust an amount of Rs10 billion pending since 2006. The regulator expressed concerns and asked why this amount had not been recovered from consumers earlier.

The Nepra chairman noted that the regulator would examine the issue from a legal point of view, deferring its decision.

During the announcement, it was revealed that Nepra would allow the recovery of Rs285 million on account of partial load correction.

Published in The Express Tribune, March 1st, 2017.

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