Body to consider electricity relief

Prime Minister Shehbaz Sharif on Friday constituted a committee to consider the possibility of deferring recovery of a one-time Rs9.9 per unit electricity surcharge from consumers of up to 300 units. The finance minister, however, sees no reason for halting recoveries.

The prime minister has set up a committee to deliberate whether any relief can be provided to electricity consumers of 200 to 300 units in payments of Rs9.9 per unit fuel cost adjustment, said Finance Minister Miftah Ismail while addressing a press conference. He emphasised that no decision has been taken to stop recovery from up to 300 units of consumers at this stage and the committee will look into the matter further.

There could be a justification for postponing the recovery of the bills for up to 200 units consumers but there is neither any justification nor fiscal space, said the finance minister. After a hue and cry was made across the country against the inflated electricity bills in August due to a Rs7 per unit increase in base tariffs and Rs9.9 per unit one-time monthly fuel price surcharge, the prime minister paused recovery of the surcharge for one month and staggered the amount over six months.

Contrary to the perception that up to 200 units of consumers would no longer have to pay the nearly Rs10 per unit cost, and that the government will give Rs21 billion subsidy, it has emerged that the government has only paused the recovery at this stage. The finance minister declined to comment when asked where the money for the Rs21 billion subsidies would come from. Although Ismail did not share details, in order to provide relief to consumers the government has decided to stagger the recovery amount.

As per the decision, the protected 11.4 million domestic consumers using less than 200 units will pay Rs3.90 per unit in August whereas the remaining Rs6 per unit cost will be recovered at the rate of Rs1 per unit in six months, starting from October 2022 to March 2023. Similarly, the domestic nonprotected 4.2 million consumers utilising less than 200 units of consumption will pay no surcharge this month but the cost will be recovered at the rate of Rs1.65 per unit in six months, from October to March 2023.

Ismail further added that those consumers who were billed and paid the total bill in August with a fuel cost of Rs9.9 per unit, their fuel cost amount will be adjusted in the September bill. Those consumers whose bills have been issued but have yet to be paid will be issued a revised bill with an extended due date according to the new FPA mechanism. Consumers were hit with electricity price hikes amidst a 45% inflation rate recorded in the outgoing, showed the weekly Sensitive Price Index, compiled by the Pakistan Bureau of Statistics.

Ismail explained that there were two reasons for higher electricity bills — the increase in tariff in line with the IMF conditions and expensive electricity generation combined with higher temperatures in May. “Our anticipated charges were Rs6 per unit but actual charges were around Rs10 because coal became very expensive and LNG prices were the highest on record,” said the finance minister. He added that the prime minister was worried about the impact of the charges on small consumers and the Power Division.

After discussions, however, the prime minister informed the IMF that the government would remove the fuel surcharge on those using less than 200 units in a month. “The government will lose Rs21 billion from this and it has removed the FCA on 56% of consumers,” claimed the finance minister. In response to a question, he said the government had not bought excess fuel to produce electricity, however, the demand in May had been high.

To a question about the impact of the devastating floods, the finance minister said that at present the government’s priority was relief and rescue, and it was difficult to assess rehabilitation costs at this stage. He went on to add that billions of rupees of livestock, shelter and crops had been destroyed. “Floods can delay the sowing of the wheat crop apart from impacting overall economic growth this year,” warned the minister. He also mentioned that the World Bank had repurposed $370 million for flood victims. Sharing details of the outcome of the Qatar visit, the finance minister said Qatar was keen to make a $3 billion investment in Pakistan.

Qatar was primarily interested in getting Pakistan’s airports on long-term lease along with management control, said the finance minister. The Gulf country also showed interest in constructing terminals at ports, buying LNG power plants and setting up largescale solar farms, he added. The prime minister has ordered the hiring of an international advisor for price discovery for the two LNG-fired power plants, said the finance minister.

Last week, however, the government dropped LNG plants from the list of items to be offered to Qatar. In case no investment in these projects materialises, Qatar will buy shares in the stock market, claimed Ismail. He said that after Qatar announced investing $3 billion in Pakistan, Pakistan has secured $5 billion funding assurances compared to the IMF’s $4 billion demand.