ECC puts off power tariff increase for two weeks

Some ministers object to the price hike due to upcoming by-elections

Shahbaz Rana October 03, 2018
There were conflicting opinions on the summary of increasing power tariffs as some ECC members argued that the government should first take strict action to curb electricity theft, said Finance Minister Asad Umar while explaining the reason behind postponing the increase. PHOTO: PPI

ISLAMABAD: The government on Tuesday again put off up to 61% increase in electricity prices for at least two weeks after some federal ministers objected to the timing of the move, fearing that the tariff hike may cost the ruling coalition the upcoming by-elections.

The decision of the Economic Coordination Committee (ECC) of the cabinet to delay approval for the second time in a week suggests that the PTI government is not ready to take tough economic decisions due to fear of backlash from masses.

However, the ECC approved sovereign guarantees to back the export of JF-17 Thunder Aircraft by PAC Kamra. These guarantees in foreign exchange will be given to the buyers of the fighter jet, jointly built by Pakistan and China.

The ECC also allowed export of one million tons of sugar aimed at clearing the glut in the domestic market. It directed the Federal Board of Revenue to present a report on tax evasion by the sugar industry.

Federal Minister for Railways Sheikh Rashid Ahmad was the staunch opponent of the government’s plan to raise electricity tariffs, sources told The Express Tribune. He was of the view that people may retaliate against the government, if the electricity rates were increased.

By-elections would be held on 37 seats of the National Assembly and provincial assemblies this month. Sheikh Rashid’s nephew is contesting from NA-60 Rawalpindi.

There were conflicting opinions on the summary of increasing power tariffs, as some ECC members argued that the government should first take strict action to curb electricity theft, said Finance Minister Asad Umar while explaining the reason behind postponing the increase.

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He denied that the decision was put off due to by-elections. Responding to a question, the minister said the finance ministry had already taken into account the subsidy impact for not increasing the electricity prices till September 30.

He agreed that an early decision would have been better due to financial implications. “Our government has delayed the increase for only two weeks but the last government delayed it for two years,” said Umar.

The Power Division has recommended a 15% to 61.2% increase in electricity prices for domestic consumers. It sought a minimum increase of Rs1.22 per unit to Rs5.7 per unit. For the category of consumers using up to 100 units per month, the Power Division has proposed a 15% increase to Rs6.66 per unit. For those who use up to 200 units, it has recommended a 24% increase, suggesting a new price of Rs9.33 per unit.

For consumers of up to 300 units, the government has proposed around 20% increase to Rs12.24 per unit. For consumers using up to 700 units, the government has proposed a 26% increase to Rs19.2 per unit.

Although the federal cabinet has already approved 143% increase in gas prices, the government has not notified it due to the upcoming by-elections.

In its last meeting, the ECC had directed the Power Division to work out a comprehensive plan in consultation with Nepra for the rationalisation of power tariff. It also asked the Power Division to back up the tariff increase plan with improvement of service delivery and reduction in transmission and distribution losses.

The cabinet body also directed that the new tariffs should be determined on the basis of 16.3% power-sector losses, as allowed by Nepra.

In light of these directives, the Power Division on Tuesday presented a comprehensive summary in the ECC meeting. It proposed new tariffs on the basis of 100% recovery of bills and 16.3% losses.

The ECC approved a plan that requires reducing electricity theft through the addition of meters and auto-cutoff breakers at the level of distribution transformers. These auto-breakers will isolate high-loss areas. The Power Division assured the ECC that it would identify the high-loss feeders within one month. But it would cost a minimum Rs350,000 per transformer.

The Power Division has also proposed launching an initiative against power theft in all provinces in consultation with the provincial governments. A task force to be headed by the provincial secretary and comprised officials of the law enforcement agencies will be set up to supervise the drive against electricity theft.

The Power Division has built all electricity surcharges in the cost of tariff. The uniform tariff has been worked out by taking into account Rs179-billion tariff differential subsidy.

The Power Division again defended the move to pass on the impact of Rs226 billion cost of new generation of CPEC and government-owned projects to the end-consumers.

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Nepra was of the view that the Rs226-billion recovery was legitimate and the cost was not related to the losses caused by bad governance. It proposed that the cost must be either recovered from the consumers or the finance ministry should give subsidy.

Sugar export

While allowing export of sugar, the ECC decided that only those sugar mills will be allowed to export who have paid arrears to farmers for all crops up to 2017-18.

Moreover, an inter-ministerial committee will hold fortnightly meetings to review sugar stock, export and price situation.

The ECC also approved revision in cess rates of tobacco for the year 2018-19 as determined by the Pakistan Tobacco Board. The ECC approved disbursement of Rs375 million on account of net salary for the employees of Pakistan Steel Mills for the month of August 2018.

The ECC directed immediate formation of a special committee comprising representatives of Finance and Power Division, Auditor General of Pakistan, Ministry of Petroleum and FBR to address various issues relating to the transfer of K-Electric shares.

Taking notice of a sudden hike in cement prices, the ECC directed the adviser on industries to hold a meeting with representatives of the industry, apprise the Committee of the causes of price increase and also suggest possible remedies.

Published in The Express Tribune, October 3rd, 2018.

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