The government has planned to increase power tariff by 14 per cent in four phases by levying surcharge on electricity consumers in a bid to generate over Rs 100 billion to eliminate circular debt which has crossed Rs 400 billion, according to documents available to The Express Tribune reveal.
Minister for Petroleum and Natural Resources Dr Asim Hussain has already offered to generate Rs100 billion by imposing petroleum levy (PL) on CNG, LPG and increasing the rate of gas development surcharge (GDS) on natural gas. The power tariff plan recently tabled before ministerial level energy committee shows that government has also planned to enhance the electricity rate for lifeline consumers and end subsidy for consumers falling under slabs of one to 100 units and 100 to 300 units.
This is being done in a bid to avoid the accumulation of circular debt in the future.
The government plans to implement an increase of four per cent immediately as a kind of surcharge whereas another four per cent increase will be implemented in October, two per cent in December and the remaining four per cent increase by February this year.
According to the plan, the ministry of water may be directed to implement the decisions of the National Electric Power Regulatory Authority (Nepra) to hike electricity rate for lifeline consumers - consuming up to 50 units per month - from the existing Rs1.83 per unit to Rs2 per unit.
The amendment in the Nepra Act will lead to monthly adjustments in consumer-end electricity tariff to be implemented automatically soon after its determination. The proposed amendment in Nepra has also been backed by multilateral donors and it will enable the government to end subsidy in power sector which is said to be a major cause of the accumulated circular debt.
At present, Nepra determines the base electricity tariff on a quarterly basis for distribution companies which federal government notifies after taking into account the element of subsidy on politico-economic considerations.
Under the Nepra Amendment Act, the tariff determined by the regulator will be immediately passed on to the consumer. Under the new arrangement, tariff will be revised every month on the basis of fuel prices and accounting for inflation, operational and energy costs.
Published in The Express Tribune, August 15th, 2011.