October 22, 2018 (MLN): The Economic Coordination Committee (ECC) meeting of the cabinet will be held on Monday (today) under the premiership of Finance Minister Asad Umar, to discuss and approve the unpreventable hike in electricity tariff by around 20%, and decide on how to cope with the upwelling of agricultural tube wells in Balochistan.
Ahead of negotiations with the International Monetary Fund for a potential economic bailout, the government had announced that a power tariff hike had become necessary owing to an addition of Rs35 billion to the circular debt, bringing the total to Rs1.2 trillion. Due to this increase in circular debt, banks had stopped lending to the power sector, further enhancing its liquidity crisis issues.
Following the failure of the National Electric Power Regulatory Authority (NEPRA) to implement an average tariff of Rs12.90 per unit for the FY17-18 due to legal and political vicissitudes, power companies were forced to charge Rs11.70 per unit, creating a gap of Rs1.20 per unit to the power sector.
Furthermore, the power supply cost had been estimated at Rs15.53 per unit for the current FY18-19, creating a gap of Rs3.82 per unit over the existing tariff of Rs11.70 per unit, necessitating a tariff differential subsidy of about Rs170 billion instead of Rs120bn.
After accounting for the budgeted subsidy, the average tariff has to be increased by about Rs2 per unit i.e. approximately 20%.
The power division has now worked out a tariff schedule envisaging no increase for lifeline consumers of less than 50 units, an 87 paisa per unit increase for 100 units, Rs1.20 per unit increase for 101 to 200 units and Rs2.05 per unit increase for 300 units and above.
The finance minister has announced that he will not allow increase in tariff for export-oriented industries in order to protect and help domestic industries to compete in the international forum.
The ECC would also be presented a summary by the power division regarding the outstanding Rs200 billion of the Quetta Electric Supply Company (Qesco) against consumers, including around Rs189 billion of agricultural tube wells.
As of June 2018, 28,000 consumers have not been able to clear Rs189 billion, while both the provincial and federal governments have outstanding payables of about Rs45 billion.
The number of tube wells has gone up to 32,000 and the power division has been advocating solarisation of all these tube wells at an estimated cost of Rs 150 billion to cut down generation cost to about Rs 5 per unit from Rs 10 per unit.
The World Bank had earlier agreed to support the solarisation campaign during the tenure of the former PML-N government, but the project couldn’t be implemented due to the political fiasco.
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