Power tariff hike put on hold
MUSHTAQ GHUMMAN
ISLAMADAD: The Ministry of Water and Power has reportedly put on hold its plan to increase power tariff by Rs1.30 per unit for domestic consumers due to Pakistan Tehreek-e-Insaf (PTI) scheduled million march on August 14, 2014, well-informed sources told Business Recorder.
The sources said, the ministry in consultation with Economic Reforms Unit (ERU) of the Ministry of Finance had prepared a summary to increase power tariff by Rs 1.30 per unit for domestic consumers using 200-300 units and Rs 2.50 per unit for agriculture tube-wells. However, the summary was not submitted to the Economic Coordination Committee (ECC) of the Cabinet as it was feared that any raise in tariff would fuel public discontent thereby strengthening support for PTI’s million march. The decision to delay power tariff hike is against the commitment made to the International Monetary Fund (IMF) and highlighted in the third staff review dated mid-June in which it notes that Pakistani authorities have committed to continuing with their plans to bring electricity tariffs to the cost recovery level.
Pakistan’s team due to reach Dubai for the fourth staff quarterly review mandated under the $ 6.64 billion Extended Fund Facility on August 5, 2014 would have to explain the reasons for the delay in power tariff hike and convince the IMF team that the delay would be made up in months to come, sources stated. Pakistan team is scheduled to begin talks with the Fund on 6 August 2014 for two weeks.
National Electric Power Regulatory Authority (Nepra) has finalised the FY 2013/14 determination of electricity tariffs expected to be notified during the current month. Tariff adjustment is expected to reduce electricity subsidies to 0.5 percent of GDP in FY 2014/15 from around 1 percent during the previous year.
The sources said, preparations are also underway for a multi-year tariff framework which according to the Fund is critical for eventually reaching full cost recovery.
With regard to price adjustments, Pakistani authorities have informed the Fund that the third round identified in the three-year plan for phasing out the Tariff Differential Subsidy (TDS) would continue to bring tariffs to cost recovery level. In this round Nepra will finalise the determination and notification of tariff for 2013-14.
Authorities stated that lower oil prices and better company performance led to a lower tariff determination relative to the previous fiscal year. For this reason, the notification will produce only four per cent increase in the weighted average notified tariff. The notified tariff will reduce the electricity subsidy to 0.5 percent of GDP for FY 2014/15.
The authorities are also preparing three year investment plans for at least three Distribution Companies (Discos) by end September 2014.
Pakistani team will however face severe criticism from the Fund over 24.75 percent increase in power sector receivables as it is a glaring failure of the Ministry of Water and Power.
