Govt requests another increase of Rs1.80 in electricity surcharge

The federal government’s recent decision to increase the power surcharge by Rs1.80 per unit has been met with criticism from officials of the National Electric Power Regulatory Authority (Nepra) as well as consumers.

Nepra had earlier allowed the government to recover Rs1.43 per unit surcharge from power consumers starting from the next financial year. However, the government petitioned for an increase of Rs1.80 per unit, bringing the surcharge to Rs3.23 per unit, claiming it was necessary to pay off circular debt and cover the cost of power theft by power distribution companies (DISCOs).

This move is expected to burden electricity consumers across the country with an additional Rs335 billion.

Members of Nepra have raised concerns over the government’s decision, questioning the need for an early increase in next year’s power surcharge. Maqsood Anwar, Member Nepra-Khyber Pakhtunkhwa, expressed fear that the government might submit more applications to raise surcharges in the future.

Member Sindh, Rafiq Shaikh, criticised the power ministry officials, questioning why consumers should be penalised for the poor performance of DISCOs. He called for resolving the problems of electricity companies and for protecting the rights of users. Member Balochistan Nepra, Muthar Niaz Rana, also expressed similar concerns, calling for governance issues within the companies to be addressed.

The federal government claims that circular debt is rising rapidly, standing at Rs2600 billion, which includes payments to Independent Power Plants (IPPs) and Power Holding Company’s debt. Nepra officials, however, argue that the imposition of a surcharge will not resolve the issue of circular debt and have questioned the power sector ministry’s actions. Tanveer Bari, a representative of Karachi Chamber of Commerce and Industry (KCCI), stated that the industry rejects the request for a surcharge increase, highlighting that in the current situation, the tariff of the industrial sector will reach Rs50 per unit.

It is worth mentioning that Nepra has already allowed the federal government to impose an additional surcharge of Rs3.39 per unit and Rs1 per unit from March-June 2023 and July-June 2024, respectively, with a cumulative impact of Rs149 billion on power consumers.

With the application of an additional Rs3.39 per unit, the total surcharge becomes Rs3.82 per unit for the four months of 2022-23, having an impact of Rs75 billion. For FY 2023-24, the additional surcharge will be reduced to Rs1 per unit, to cover the additional markup charges of PHL loans not covered through the already applicable FC surcharge of 0.43 per unit.

According to the Nepra decision issued in the matter of the motion of the federal government, with respect to the recommendation of consumer-end Tariff for XWDISCOs and K-Electric, the total surcharge becomes Rs1.43 per unit for FY 2023-24, having an impact of Rs74 billion. The authority has decided to allow the application of the surcharge to be recovered from different categories of consumers of K-Electric, for the period from March to June 2023 and for FY 2023-24.

The power division has explained that the additional surcharge is intended to cover the markup charges of PHL loans not covered through the already applicable FC surcharge of Rs. 0.43 per unit. With these additional surcharges, an additional amount of Rs75 billion will be billed for the period from March-June 2023, against which around Rs68 billion will be recovered at an expected recovered rate of 90%.

Similarly, for FY 2023-24, with the additional surcharge of Rs1 per unit, an amount of around Rs74 billion will be recovered, assuming a recovery rate of 90%.

Published in The Express Tribune, March 17^th, 2023.

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