Rs5.36/unit hike in base electricity tariff to ruin industry

Resenting frequent increase in power tariff the Federation of Pakistan Chambers of Commerce and Industry’s Businessmen Panel Chairman and FPCCI former president Mian Anjum Nisar has strongly opposed the government plan of increasing base electricity tariff across the country by a cumulative Rs5.36 per unit in three phases over the next two years.

Mian Anjum Nisar said the constant increases in energy rates on the behest of the International Monetary Fund (IMF) would make the Pakistani products uncompetitive in the international market.

He said that it is unfortunate that the average electricity uniform rate would gradually go up to Rs21.04 per unit (excluding taxes, duties, surcharges and other add-ons in the bill) that currently stands at about Rs15.68 per unit. This would be achieved through an increase of Rs1.39 per unit in tariff rebasing in June, followed by another Rs2.21 per unit increase in rates through another tariff rebasing in July 2021, involving revenue impact of Rs199bn next year and Rs215bn in FY2023. The cumulative impact of this rebasing in July 2021 has been worked out at a burden of Rs414 billion on power consumers. He said that cost of electricity has reached a point where the consumers have started switching to alternative solutions yet another Rs1.76 per unit increase will be made through tariff rebasing in July 2022 to generate additional Rs176bn.

Criticizing Circular Debt Management Plan (CDMP) of the government, he said the CDMP, which also has the blessing of international lending institutions, has bound the energy ministry and Nepra to issue notifications for three rebasing tariff in June this year, July 2021 and July 2022, leading to a total collapse of the industry.

Talking to a trade delegation at his office, he said the regular attempt of economic managers to increase oil prices along with the hike in power and gas tariffs will ultimately harm the government’s overall move of reducing the production cost in the country announced by the prime minister in various phases. The present, as well as the previous governments, had always been forced for an exorbitant hike in the energy tariffs due to excessive capacity payment to IPPs in dollars, leading to further addition in public debt of the government, which ultimately passed on to the end-consumers.

Quoting a report, he said the power crisis has cost $82 billion in lost GDP between 2007 and 2020. In per capita terms, the power crisis has cost each Rs43,504 during this period, with rupee per capita GDP lower by 23 per cent as a result.

The lower GDP growth cost approximately 0.9 to 1.6 million jobs a year, on average, between 2007 and 2018. Fiscal costs to the budget have amounted to a further 1.2pc of GDP each year, on average, between FY2007 to FY2019.

He called for power sector reforms, considering the matter of overbilling, technical losses, transmission issues, proposal on decentralisation of the sector, promotion of off grid solutions, incentives for renewable energy solutions and capacity payments to the independent power producers. If the government failed to take immediate measures the power sector is likely to choke up due to heavy outstanding dues, he feared.

Anjum Nisar said the overall power sector reforms can be included closing down of inefficient IPPs, re-negotiations with the IPPs, bringing reforms in govt-owned power producing plants, improving efficiency and reducing costs of Wapda plants, besides converting the agriculture tube wells in Balochistan to solar in collaboration with the provincial government to reduce the cost.

He said the government had pledged to revamp the power sector and continued to raise electricity prices to eliminate subsidies, but failed to implement reforms to make the power sector efficient. The circular debt issue could have been resolved today, if the government had eliminated production, transmission and distribution losses; checked electricity theft and recovered the outstanding electricity dues, he stressed.

Mian Anjum Nisar said it was imperative to make power and gas tariffs for domestic, as well as export sectors compatible with the tariff being applied in regional and neighbouring countries.

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