Power Division tables plan to freeze tariff
It will mean approaching multilateral donors to borrow Rs150 billion
PHOTO: REUTERS
ISLAMABAD:
The Power Division tabled a plan before the Cabinet Committee on Energy (CCOE) for freezing power tariff for the next six months in the wake of coronavirus-related lockdown, a plan which will mean going to multilateral donors to raise another Rs150 billion.
The CCOE considered the plan in its meeting held on March 27 but did not take any decision.
Sources told The Express Tribune that the Economic Coordination Committee (ECC) would now consider the plan in its upcoming meeting for approval.
The Power Division proposed that the CCOE should refrain from any increase in consumer bills in order to mitigate the impact of volatility caused by monthly fuel cost adjustment and quarterly tariff adjustment.
The CCOE was informed that the Power Division had calculated an impact of Rs73 billion because of the fuel cost adjustment and Rs77 billion due to non-realisation of quarterly adjustment. As these costs would not be passed on to consumers, the Power Division said, the flow of power-sector circular debt would increase.
In a bid to keep the tariff unchanged for the next six months, it was proposed that the government could approach the International Monetary Fund (IMF) to seek its approval and engage with other multilateral donors like the World Bank and the Asian Development Bank (ADB) in order to raise Rs150 billion to fill in the financing gap.
There are some pending tariff determinations that are required to be passed on to the consumers. According to officials, the power tariff can jump to Rs24 per unit if all the pending tariff revisions are passed on to the consumers.
At present, the average consumer tariff including income taxes and surcharges stands at Rs18.65 per unit, which includes Rs4 on account of taxes, duties and surcharges.
Several electricity tariff revisions have been made by the National Electric Power Regulatory Authority (Nepra), which are due to be notified by the government. If these are notified, the electricity tariff would hike to Rs24.47 per unit compared to the existing tariff of Rs18.65, sources told The Express Tribune.
The average consumer tariff stood at Rs15.36 per unit in January 2019, which jumped to Rs18.65 now on account of quarterly adjustments and monthly fuel cost revisions. Nepra had determined a tariff increase of Rs1.61 per unit for the second quarter of current financial year 2019-20. A tariff revision of Rs2.44 per unit was due on account of fuel price adjustment for December 2019 and Rs1.76 per unit on account of fuel cost adjustment for January 2020.
The Power Division proposed that the tariff should be frozen for the next six months due to the coronavirus outbreak. The Finance Division, in collaboration with the Planning Commission, Economic Affairs Division and Power Division, could take up the matter with the IMF and other multilateral donors.
However, the CCOE did not approve the proposal, fearing a further increase in the circular debt, which was a major problem for the power sector.
Published in The Express Tribune, March 31st, 2020.
The Power Division tabled a plan before the Cabinet Committee on Energy (CCOE) for freezing power tariff for the next six months in the wake of coronavirus-related lockdown, a plan which will mean going to multilateral donors to raise another Rs150 billion.
The CCOE considered the plan in its meeting held on March 27 but did not take any decision.
Sources told The Express Tribune that the Economic Coordination Committee (ECC) would now consider the plan in its upcoming meeting for approval.
The Power Division proposed that the CCOE should refrain from any increase in consumer bills in order to mitigate the impact of volatility caused by monthly fuel cost adjustment and quarterly tariff adjustment.
The CCOE was informed that the Power Division had calculated an impact of Rs73 billion because of the fuel cost adjustment and Rs77 billion due to non-realisation of quarterly adjustment. As these costs would not be passed on to consumers, the Power Division said, the flow of power-sector circular debt would increase.
In a bid to keep the tariff unchanged for the next six months, it was proposed that the government could approach the International Monetary Fund (IMF) to seek its approval and engage with other multilateral donors like the World Bank and the Asian Development Bank (ADB) in order to raise Rs150 billion to fill in the financing gap.
There are some pending tariff determinations that are required to be passed on to the consumers. According to officials, the power tariff can jump to Rs24 per unit if all the pending tariff revisions are passed on to the consumers.
At present, the average consumer tariff including income taxes and surcharges stands at Rs18.65 per unit, which includes Rs4 on account of taxes, duties and surcharges.
Several electricity tariff revisions have been made by the National Electric Power Regulatory Authority (Nepra), which are due to be notified by the government. If these are notified, the electricity tariff would hike to Rs24.47 per unit compared to the existing tariff of Rs18.65, sources told The Express Tribune.
The average consumer tariff stood at Rs15.36 per unit in January 2019, which jumped to Rs18.65 now on account of quarterly adjustments and monthly fuel cost revisions. Nepra had determined a tariff increase of Rs1.61 per unit for the second quarter of current financial year 2019-20. A tariff revision of Rs2.44 per unit was due on account of fuel price adjustment for December 2019 and Rs1.76 per unit on account of fuel cost adjustment for January 2020.
The Power Division proposed that the tariff should be frozen for the next six months due to the coronavirus outbreak. The Finance Division, in collaboration with the Planning Commission, Economic Affairs Division and Power Division, could take up the matter with the IMF and other multilateral donors.
However, the CCOE did not approve the proposal, fearing a further increase in the circular debt, which was a major problem for the power sector.
Published in The Express Tribune, March 31st, 2020.