Electricity: Govt enhances consumption limit of subsidised consumers

Subsidy may be footed by govt, or passed on to other consumers.

ISLAMABAD: The government has raised the bar for the maximum amount of electricity that can be consumed by the lowest slab of ‘life-line’ consumers. The ‘life-line’ consumption limit has been increased from 50 to 100 units per month in an effort to provide relief to power consumers. 

The decision was taken by the Prime Minister Syed Yousaf Raza Gillani during the Second Energy Conference, in order to provide relief to the low income group. The Ministry of Water and Power had moved the proposal.

Earlier, consumers using 1 to 50 units of electricity per month were exempted from tariff increases and paying the General Sales Tax (GST). Now, domestic consumers who limit consumption to 100 units per month will be treated as ‘life-line’ consumers and benefit from exemption from tax and tariff increases.

The tariff under the new slab will automatically be reduced, and consumers will be subsidised by about Rs3.40 per unit. According to a power ministry official, the existing tariff of ‘life-line’ consumers (consumption up to 50 units) was Rs1.87 per unit, whereas those consuming up to 100 units per month had to pay Rs4.54 per unit. The latter also paid GST at Rs 1.16 per unit.

An official said that around 10.3 million consumers use 50 units of electricity per month nationwide. After the increase in the consumption limit to 100 units, about 3.4 million more consumers will be added to the beneficiaries of subsidised electricity. The total number of ‘life-line’ consumers will now stand at 13.7 million.

The expanded lowest slab will be effective from the coming month. The government has issued a notification in this regard to power distribution companies (Discos). According to a government official, the Ministry of Water and Power has also moved a summary to the National Electric Power Regulatory Authority (Nepra) in order that the latter provide guidelines on financing the subsidy.

An official of the power ministry said that the amount of targeted subsidy would now stand at Rs13 million per month, accumulating to Rs156 million a year.  Nepra will decide whether the subsidy will be picked up by the government, or footed by the consumers who do not fall into the exempt category.

“If Nepra does not allow putting the load of subsidy on other categories of consumers, the finance ministry will pay it,” the official said; adding, however, that it would put additional burden on the government and add to the burgeoning circular debt.

In the past, subsidies have added to financial woes in the power sector. According to latest estimates, the government will pay a total of Rs396 billion in subsidies during the current financial year.

Published in The Express Tribune, April 13^th, 2012.