The government has put a freeze on electricity tariffs, resisting pressure for a four per cent increase in rates and staving off any potential backlash ahead of Pakistan Tehreek-e-Insaf’s (PTI) long march on August 14.
Any such upward revision would have invited public derision, especially at a time when opposition groups are spearheading a campaign against the government.
The PTI, in particular, has promised to continue its proposed sit-in in Islamabad until Prime Minister Nawaz Sharif steps down and calls a re-election.
Pakistan was supposed to increase the tariffs ahead of talks with International Monetary Fund (IMF), commencing today (Wednesday) in Dubai, said finance ministry sources. The government has decided not to increase tariffs until political stability and calm returns, the sources said. The IMF will be told that the increase could be implemented either in September or October, the sources added.
The finance ministry spokesman Rana Assad Amin and Information and Broadcasting Minister Senator Pervaiz Rashid were unavailable for comment.
The sources said the government has a cushion and the delay in increase in power tariffs will not have significant effect on the budget. Another reason for increasing the tariffs after August is that there will be comparatively few hours of load-shedding that will also help avoid any public reaction against the rise, they added.
Under the $6.7 billion financial bailout package, the IMF had set a pre-condition for finalising the determination and notification of electricity tariffs for fiscal year 2013-14 before close of the fiscal year.
The prior action was met to the extent of determination by the power sector regulator before the IMF’s board meeting that approved the fourth loan tranche of $555 million in end-June.
According to Memorandum of Economic and Financial Policies (MEFP) that Pakistan submitted to the IMF, “[The government] have prepared the third round identified in the three-year plan for phasing out the Tariff Differential Subsidy (TDS) to continue to bring tariffs to cost recovery level”.
It also noted that National Electric Power Regulatory Authority (Nepra) has finalised the determination and the notification will produce only a 4 per cent increase in the weighted average notified tariff.
The government has vowed to protect the lifeline consumers from the planned increase. It assured the IMF that the notified tariff will reduce the electricity subsidy to just half percentage of GDP for the FY 2014/15. In the last fiscal year, the government paid Rs312 billion or 1.3% of GDP in power subsidies.
The latest IMF report also noted that Nepra’s notification implied an increase in electricity tariffs by an average 4 per cent, while eliminating subsidies on industrial, commercial, bulk, and residential consumers above 200 units monthly consumption.
The sources said there was ambiguity over the increase in gas utility prices. But Ogra spokesman Afzal Bajwa said that the regulatory authority has not yet completed an exercise required to work out revenue requirements of gas utility companies.
Published in The Express Tribune, August 6th, 2014.