Electricity tariff increased by Rs1.27 per unit: Asad Umar

Says situation of Chinese assistance to get clear by start of talks with IMF

ISLAMABAD: After securing $6 billion assistance from Saudi Arabia, the government is working to get a comprehensive package from China that will also include financial support.

“The government is working to obtain a comprehensive package from China that includes investment, trade, assistance in agriculture research and financial support,” said Minister of Finance Asad Umar while addressing a news conference on Thursday after the federal cabinet approved increase in power tariffs.

He was flanked by Minister for Information and Broadcasting Fawad Chaudhry and Minister for Power Omar Ayub

“By the time the government would begin talks with the International Monetary Fund (IMF), the situation about the Chinese assistance would become clear,” he said.



A source in the Q-Block told The Express Tribune that the government is trying to get a minimum $2 billion deposit from China. This will take the Chinese cash injection to $4 billion.

The government was eager to get loans from ‘friendly countries’ to avoid tough conditions that are usually attached with big bailout packages being approved by the IMF.

An IMF team would arrive in Pakistan on November 7 – four days after Prime Minister Imran Khan would start his maiden visit to China.

Umar said the easiest decision was to go to the IMF and take a loan but the government has not adopted this path and instead tried to meet the financing requirements from multiple sources.

The minister said Saudi Arabia has given $3 billion in balance of payments support and another $3 billion annual oil facility. “The total assistance quantum comes to $6 billion, as the $3 billion will be matured for repayment after one year but will be rescheduled for the next year.”

The Saudi assistance has diminished the chances of a default on international payments, as previously the country’s reserves were not sufficient to meet $11.7 billion debt repayment obligations for the current fiscal year.

The central bank reserves further plunged to $7.83 billion by the end of last week, which will bounce back close to $11 billion once the Saudi loan money is transferred into its accounts.



Umar dismissed concerns that Pakistan may have had to agree to meet some Saudi demands in return for securing the rescue package. “The Saudis did not make any demands. And this is the Pakistan-Saudi relation. It's a people-to-people connection,” he said.

He also clarified that Pakistan would never play a role to divide the Muslim countries and instead would work for their unity. He said the China-Pakistan Economic Corridor (CPEC) would remain bilateral strategic initiative between China and Pakistan.

Chaudhry said Saudi Arabia also agreed to lower visa fees for Pakistan from 2,000 Saudi Riyal to300.

Power tariffs

The minister of finance announced that the federal cabinet has ratified the decision to increase average electricity tariffs by Rs1.27 per unit to secure roughly Rs130 billion additional revenues this year. The amount is exclusive of sales tax being charged at 17%.

Umar clarified that the National Electric Power Regulatory Authority (Nepra) had originally recommended a hike of Rs3.82 per unit, but the government raised the price by Rs1.27 or 11%.

“If we did not increase the rates, the power sector could have sustained Rs550 billion losses in this fiscal year. Due to the Pakistan Muslim League-Nawaz (PML-N) government’s inaction, the power sector sustained Rs453 billion losses in the previous fiscal year,” he said.

Umar said up to 70% of the users will not be impacted by the increase in tariffs, as the government has decided to protect consumers from the increase who consume up to 300 units a month.

He said the electricity prices for the agriculture tube wells have been reduced by 48% to Rs5.35 per unit. However, the government has increased the electricity prices being consumed in agriculture scarp by up to 31%. Against the earlier rates of Rs12 per unit, the new scarp rates will be Rs15.68 per unit.



The bulk supply electricity consumers prices have been increased up to 26% and their maximum tariffs will be Rs21.60 per unit for C3 category of above 11 kilowatt connections.

Umar said the government has protected the small and medium commercial consumers from the hike, which constitute 95% of the total connections. For the rest of the commercial consumers the prices have been increased by 25%.

For those whose monthly consumption is between 301 to 700 units, the prices have been increased by 10% or Rs1.60 per unit. Similarly, for consumers using more than 700 electricity units in a month, the increase is Rs2.70 per unit or 15%.

For the time of use domestic consumers, the government has increased the electricity tariffs by 15%.

The five export-oriented sectors have also been protected against the increase and the finance minister said these sectors would be paying electricity prices at 7.50 cents per unit, as had been promised by the PTI in its elections manifesto.

Umar said the PTI government would give preference to enhancing exports and remittances instead of running the economy by taking loans. “The Power Division has also been given a task to plug losses and stop theft to recover Rs140 billion,” he added.

The details shared by Asad Umar suggest that the Pakistan Tehreek-e-Insaf (PTI) government lived up to its promise of not to penalise the electricity consumers for the inefficiencies and the electricity theft.

Where the government increased average tariffs by almost 11% to recover additional Rs145 billion from the consumers, it also assigned the task to the Power Division to save Rs140 billion in this fiscal year by improving recoveries of the bills and cracking down against the electricity theft.

The maximum increase in electricity prices was 31%.

Minister for Power Omar Ayub over Rs60 billion will be saved by addressing system inefficiencies. He said a significant amount will also be recovered against the outstanding dues of Rs950 billion.

Ayub also announced to start crackdown against big electricity thieves. He said in the first phase the campaign would begin from Lahore. He said these thieves would be put behind bars in addition to being heavily fined.

He said the electricity transmission and distribution system will also be improved with an initial investment of $900 million. The Asian Development Bank loan for installation of smart meters at Lahore and Islamabad power distribution companies would be revived.

“There is annul Rs250 billion to Rs280 billon electricity theft in the country. The country also sustains Rs47 billion annual losses due to idle capacity payments. New power plants are of no use when the country’s transmission system cannot take load of more than 19,500 megawatts,” he added.