Govt decides against tariff hike for protected consumers
• Revised summary to be rushed through cabinet; Nepra meeting moved to July 10
• Rs50bn revenue gap to be covered through subsidies, ‘innovative’ tariff setting
ISLAMABAD: Amid public outcry and potential political backlash, the government has decided to step back from about 51pc increase in electricity rates it had approved last week for so-called protected consumers by meeting a ‘prior action’ required by the International Monetary Fund (IMF).
On the instructions of the prime minister, a revised summary would be urgently run through the federal cabinet that only last week cleared the massive tariff hike, including for ‘protected consumers’ whose consumption remains below 200 units per month.
Against this backdrop, the National Electric Power Regulatory Authority (Nepra) also revised the date of a public hearing from July 8 to July 10. The hearing was sought by the power division for Rs5.72 per unit average increase — going up to Rs7.12 per unit for higher-end domestic and other consumer categories, but it has asked Nepra to wait for the revised summary.
According to sources, the PM had been alerted by some quarters, other than the power division, that consumers already had a lot of pent-up anger following accumulated bills in view of public holidays around Eidul Azha, coupled with higher consumption in hot and humid weather. They had already expressed their wrath through violence against officials of distribution companies in some areas.
Before flying to Quetta from Islamabad, the prime minister issued instructions on Monday morning to modify the tariff increase summary already submitted to Nepra and exempt protected consumers from the hike. By the evening, the power division had circulated the summary as instructed. The resultant revenue gap of about Rs50 billion would be covered by the government through subsidies and innovative tariff setting.
The tariff hike has to become effective from July 1, 2024 for all ex-Wapda distribution companies (Discos) and K-Electric as part of the IMF’s “prior action and structural benchmark,” and the public hearing is just a formality as the Nepra itself had determined about 20pc (average Rs5.72 per unit) increase in the uniform national tariff to ensure about Rs3.8 trillion in funds to the 10 Discos during the fiscal year 2024-25.
The tariff adjustment summary approved by the federal cabinet through circulation had envisaged raising the tariff by 51pc for “protected consumers” using up to 100 units per month and 41pc for protected consumers using up to 200 units per month. More than 15.5 million consumers fall into this category, including 10.11 million in less than 100 units and 5.5 million in 101-200 units who remain below this threshold and could come on roads anytime.
But those unfortunate who cross 200 units even once in six months fall in the “unprotected category”. Among the “unprotected category”, the biggest increase of more than 43pc (or Rs7.12) to Rs23.6 per unit (kilowatt-hour, or kWh) has been suggested for the first 100 units involving another 5.95 million consumers.
This is followed by a 31pc and 27pc increase in rates (Rs7.12 per unit each) for the 101-200 and 201-300 slabs to Rs30.1 and Rs34.25 per unit, respectively. Another five million consumers fall into these two categories.
The consumers of the next five household categories ranging from 300 units and above would face a 14pc to 22pc increase (Rs6.12 per unit each), but they would be simultaneously subjected to a new fixed capacity charge of Rs200-1,000 per kilowatt capacity.
This fixed charge would be Rs400 per kilowatt and gradually increase to Rs5,000 per month depending on the sanctioned load capacity. Likewise, agricultural consumers would be subjected to a fixed capacity charge of Rs400 per kilowatt, and their tariff increase would range between 19-44pc (about Rs5.75 to Rs6.59 per unit).
All other consumer categories — commercial, general services, industrial and bulk — would be subjected to Rs1,250 per kilowatt fixed capacity charge compared to the existing rate of Rs400-500 per kilowatt. On top of this capacity charge increase, commercial and general services tariff would increase by 17pc (Rs5.89 per unit) to about Rs44.
On the other hand, the industrial tariff for the B1 category would be reduced by 6-8pc (Rs2-2.65pc) to Rs31.65 per unit, but the off-peak rate for all other industries exceeding 25-kilowatt capacity would increase by 8-11pc (Rs2.64 to Rs3.56 per unit), and the peak rates would remain unchanged.
The power division said the proposed tariff would generate Rs3.5tr to 10 Discos during the current fiscal year, about Rs580bn higher than last year. After the impact of 18pc GST, the total revenue would reach around Rs4.2tr in addition to any further adjustments in the shape of monthly fuel charges and quarterly tariff adjustments for exchange rate, inflation and other factors.
The average national base tariff, including for K-Electric, has now been worked out at Rs35.50 per unit for this fiscal year, against Rs29.78 per unit for the last year. This would yield about Rs3.763tr in revenue to 10 Discos this fiscal year, compared to Rs3.28tr last year. An official said the real, applicable average national tariff would now be between Rs65 and Rs72 per unit after including surcharges, taxes, duties, and levies, as well as monthly and quarterly adjustments.
Published in Dawn, July 9th, 2024