FCA exemption

The government has gone ahead with expanding the fuel adjustment charge exemption to consumers using under 300 units of electricity. The previously announced exemption only covered up to 200 units. According to Prime Minister Shehbaz Sharif, this new tier will cover 75% of consumers nationwide, whereas the 200-unit exemption only covered about half of the country. As things stand, the charge, formally called fuel charges adjustment (FCA), has been suspended by the Lahore High Court after a citizen challenged its imposition. This relief, however, may not last long, as high courts have quickly disposed of similar challenges in the past.

The expanded exemption will provide some welcome relief to millions of people as inflation has spiked again due to the nationwide floods. However, it is worth noting that the reduced charge is supposed to kick in from next month, rather than the previous month, meaning that people can still expect massive additional levies in their summer bills. In fact, the month of September usually sees electricity use begin to decrease, as the weather begins to improve, meaning that most people’s average bills will already have peaked over the summer and reducing the amount of ‘savings’.

Even fuel prices have risen a bit, despite international oil prices falling in recent weeks. Curiously, Prime Minister Shehbaz insisted that the price hike was beyond his control, when falling oil prices was one of the reasons Federal Energy Minister Khurrum Dastgir said the government was able to adjust the FCA. Even then, the government has also said the FCA was only reduced because the International Monetary Fund allowed it, giving it someone to blame if it needs to be raised again. The government also continues to blame the previous PTI government for the imposition of the FCA. While the PTI government does deserve a massive share of the blame, the incumbents’ indecisiveness during their critical first days in power allowed a bad situation to get worse.

At the same time, we must also give the government some leeway due to the impact of the floods. Most of the cash on hand available will need to be diverted to flood relief, because even if international donors commit the amount of aid needed, getting the cash, food and supplies from abroad to flood victims will take time, and time is something that many of the victims do not have.

Published in The Express Tribune, September 3^rd, 2022.

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