The government may increase power tariff by Rs 0.18 per unit across the country to implement a plan that includes bringing power produced by Karachi Electric Supply Company (KESC) in line with other power distribution companies.
Sources told The Express Tribune that the proposed tariff equalisation plan will be implemented to reduce subsidy that is leading to accumulation of circular debt.
The Energy Committee has considered four measures for KESC to mitigate the liquidity crunch and swelling circular debt. These key measures include supply of 183 million cubic feet per day additional gas to KESC, implementation of fuel adjustment surcharge, inclusion of electricity generated by KESC in the national basket and increase of Rs0.18 per unit across the country.
The total cost of electricity produced by power distribution companies excluding KESC is Rs9.4 per unit, of which the government is charging Rs7.83 per unit from consumers while the remaining amount of Rs1.57 per unit is paid by the government in the form of subsidy. Moreover, the power produced by KESC is Rs15 per unit of which consumers are charged Rs9 per unit while the remaining cost of Rs6 per unit is paid by the federal government.
Sources said that under the proposed plan, the rate of electricity by KESC will be brought to the level of Rs9.4 per unit, the cost of other distribution companies, to reduce the subsidy by including KESC’s power generation in the national basket.
Hence, the federal government will reduce subsidy for consumers of Karachi from the current Rs6 per unit to Rs1.57 per unit being provided for consumers of other distribution companies.
The energy committee observed that power subsidy for consumer of KESC has been one of the major reasons behind accumulation of the circular debt. The committee noted that the government at the time of KESC’s privatisation had agreed at Rs15 per unit rate of power tariff.
Despite the fact, KESC is charging Rs9 per unit from the consumers and the remaining amount of Rs6 per unit is being subsidised by government that amounts to Rs 72 billion per year, sources said adding that the government had allocated Rs24 billion subsidy for KESC consumers and the remaining amount led to circular debt.
Published in The Express Tribune, August 20th, 2011.