ISLAMABAD: The government is going to increase electricity tariffs by 5.4% and revise gas prices by at least 30% next month in an effort to recover Rs145 billion from consumers.
The proposed revision will come as a shock to consumers who were hoping to cash in on the remarkable downslide in international oil prices.
It has already given assurances in writing to the International Monetary Fund (IMF) and all the modalities to pass on the increase have been discussed with the IMF staff last month, reveals a report of the IMF.
The assurances are given in Memorandum of Economic and Financial Policies (MEFP), signed by Finance Minister Ishaq Dar and State Bank of Pakistan Governor Ashraf Wathra.
The 5.34% increase in electricity prices will be implemented through a 61 paisa per unit surcharge from next month, according to the IMF and finance ministry documents.
The increase will be over and above 2.5% increase that the government implemented by slapping 30 paisa per unit surcharge in October this year.
The government admitted to the IMF that by levying 30 paisa per unit surcharge it denied the benefits of reduced global oil prices through automatic fuel surcharge to the consumers.
The Rs2.96 per unit reduction in electricity prices that the government is claiming to achieve is one-off item and applicable for only a single month. With 61 paisa increase, the overall notified per unit average tariff will increase to Rs12.43 per unit. However, the government is already charging up to Rs18 per unit from smart-meter electricity consumers, irrespective of their consumption threshold.
The measure to impose a surcharge is being taken to recover an additional Rs58 billion from the consumers in a bid to keep power subsidies at the IMF agreed level of 0.7% of the Gross Domestic Product or Rs203 billion. The increase will be implemented by denying the consumers benefits of reduction in global oil prices to the consumers, the finance minister’s signed letter revealed.
Contrary to Prime Minister Nawaz Sharif’s commitment to protect consumers using up to 200 units per month electricity, the Finance Ministry assured the IMF that 61 paisa per unit surcharge will be levied on consumers using above 50 unit electricity.
The IMF disclosed that Pakistan remained committed to make further adjustments in electricity surcharge in February again. These surcharges will also help recover Rs28 billion in current fiscal year from honest consumers to pay interest on debt raised from the banks to clear circular debt, the documents further state.
The government has also assured the IMF that it will not only increase the gas tariffs but will also impose a gas levy to recover shortfall in revenues after the courts have granted the stay order against Gas Infrastructure Development Cess (GIDC). Due to pending court cases, the recovery of GIDC has been suspended.
“By January 2015, the authorities are committed to notifying new gas prices, which were postponed from August due to the political protests”, showed the MEFP. “The implementation of gas price rationalisation should move forward with the gas levy,” it added.
The gas prices are expected to increase by minimum 30% in addition to the impact of gas levy aimed at recovering Rs78 billion from the consumers.
“If GIDC legal concerns are not resolved by January, we stand ready to take compensatory measures as agreed, including adjustment on the revenue side, to reach our fiscal target”, assured the government.
Published in The Express Tribune, December 24th, 2014.