Rs14.38bn extra subsidy approved
MUSHTAQ GHUMMAN
ISLAMABAD: The federal government has approved additional subsidy of Rs 14.38 billion to keep Discos' tariffs unchanged which were raised under quarterly tariff adjustment and monthly fuel adjustment reportedly due to political pressure, which is violative of the Extended Fund Facility programme signed with the International Monetary Fund (IMF). In federal budget 2020-21, the federal government slashed inter-Disco subsidy to Rs 110 billion against budgetary allocations of Rs 162 billion for 2019-20, indicating a reduction of 32 per cent in the light of agreement with the IMF and other international financial institutions
Well informed sources told Business Recorder that at a recent meeting of federal cabinet, Prime Minister, Imran Khan sought clarification on the impact on electricity tariff with respect to decision of ECC on "tariff rationalization for power sector - FCA and quarterly adjustments;" the Power Division responded that per unit tariff for the domestic consumers would increase marginally.
The cabinet members argued that per unit increase in tariff would translate into substantial hike in the electricity bill, which was not desirable in the face of economic difficulties facing the common man due to Covid-19 situation.
After detailed discussion, the Cabinet directed that electricity price be kept unchanged for all categories of consumers. Therefore, the quarterly adjustments, determined by Nepra may be notified after incorporating cross subsidy and continuing additional charges as imposed through SRO from Jun 28 2019, and September 30, 2019 so that electricity price remains unchanged. The Cabinet further directed that the difference of Rs 14.38 billion be adjusted as additional subsidy to power sector during current financial year.
On September 30, 2020, Power Division stated that in pursuance of section 31(7) of Regulation of Generation, Transmission and Distribution of Electric Power Act, 1997 and Nepra approved mechanism of FCA, the Central Power Purchasing Agency Guarantee Limited (CPPA-G) provided details of actual fuel charges etc. for the months of November 2019 to June 2020 to Nepra to enable it to make adjustments in the approved tariff of the Discos. The Federal Cabinet directed on February 25, 2020 to keep electricity price unchanged till June-2020 and re-affirmed its earlier decision on April 9, 2020 that the price of electricity would remain unchanged till June 2020.
As per the determination the FPA rate in the billing month of August 2020 was to be Rs 2.4228/ kWh (for subsidized categories); pursuant to the decision of the cabinet the recovery for FCA, for the period from Nov-19 to June 20, and Quarterly Tariff Adjustments (QTA) for 02 and 03 of FY 2019-20 was pending and was required to be passed on to the consumers, as required by the referred provision of law. Nepra notified FCA for Nov-19 to Jun-20 through decision of August 7, 2020 to pass on to consumers in two months (August & September 2020). The FPA rate in the billing month of Aug-2020 would be Rs 2.4228 /kWh (for subsidized categories including domestic consumer upto 300 consumption) and Rs 1.1711/kWh (for other non-subsidized consumer categories).
The FPA rate in the billing month of Sep-2020 would be Rs 2.8603 /kWh (for subsidized categories including domestic consumers up to 300 units of consumption) and Rs 1.0982/kWh (other non-subsidized consumer categories). The recovery on account of FCA would be around Rs 17 billion. These adjustments were not passed on to consumers on account of above mentioned Cabinet decisions.
Nepra also determined the periodic quarterly adjustments (QTAs) for 2nd and 3rd Quarters of FY 2019-20 and recommended the same to Federal Government, on September 24, 2020 for notification. These periodic adjustments were determined by Nepra in accordance with the mechanism, notified through SROs dated January 01, 2019.
Power Division further informed that the Federal Government approved the uniform tariff guidelines on October 24, 2018. Accordingly, periodic adjustments on the principle of maintaining uniform tariff for Discos for each of the consumer categories have been regularly determined and recommended by Nepra for notification in the official Gazette.
Power Division, in its summary said that Federal Government has the following options, while notifying QTA determined by NEPRA: (i) to notify a tariff increase of Rs 1.62 /kWh across all categories of consumers, except lifeline consumers as recommended by Nepra. This will have the implication of increase/decrease in per unit cost of electricity for different categories of consumers since the earlier QTAs (Q1 to 04 for FY 2018-19) were at different rates; (ii) to notify the Nepra approved quarterly adjustments after incorporating the targeted quarterly subsidy and continuing the additional charges as imposed through SROs dated June 28, 2019 and September 30, 2019 along with further additional charge. The implication of this option will be a slight increase in the price of electricity for domestic and commercial consumers using less than 5-kW (except the lifeline consumers); and (iii) to notify tariff increase in the same amount as previously notified for January t April (01-04) of FY 2018-19. This option would imply additional subsidy of Rs 14.38 billion.
To implement the QTA determined by Nepra of September 24, 2020 and recover FCA determined by Nepra in its determination of August 7, 2020, Power Division submitted following proposals for approval of the ECC: (i) to notify the Nepra approved quarterly adjustments after incorporating the targeted quarterly subsidy and continuing the additional charges as imposed through SROs of June 28, 2019 and September 30, 2019 along with further additional charges; and (ii) continue to charge FCA to the consumers as per guideline provided in Nepra FCA decision of August 07, 2020, and as required by law.
Accordingly, the FPA rate applicable in month of Aug-2020 would be billed in the billing month of Nov-2020 and the FPA rate applicable in month of Sep-2020 would be billed in the billing month of Dec-2020.
The cabinet decided not to pass on the impact of quarterly tariff adjustment and fuel component adjustment to the consumers.
With the recent decision of federal cabinet, sources said, the implementation on Paisa 84 per unit increase in tariffs of Discos for July 2020 under monthly FCA was also in doubt due to political considerations.
During discussion in the cabinet Prime Minister enquired as to whether the decision of ECC in the case titled 'Sale Price for Natural Gas' would translate into increase in gas tariff for the consumers. Special Assistant to the Prime Minister on Petroleum Division clarified that domestic, commercial and cement sectors were excluded. Furthermore, due to discontinuation of charging GIDC from the consumers, there would be a net decrease in the bills.
