Power Tariff for SME Sector Slashed by Half

Prime Minister Imran Khan has announced that the power tariff for the Small and Medium Enterprises (SMEs) sector will be halved from its previous level starting November 1, 2020.

The prime minister secretariat had earlier directed the Economic Coordination Committee (ECC) to determine the power tariff for the industrial sector to be reduced by 50 percent, especially for Small and Medium Enterprises (SMEs). However, the ECC had submitted the suggestion that the power tariff may be reduced in the range of 25 to 30 percent.

The ECC left its final approval with the cabinet on Monday, which on Tuesday (today) has decided that starting November 1, the additional electricity used by SMEs up to June 30, 2021, will be sold at 50 percent lower cost.

ECC also directed the Power Division to clarify the details on different slabs of power tariff before presenting the final decision to the federal cabinet for approval. As per news reports, ECC reiterated its decision to fix the power tariff at Rs. 12.96 per unit against an average per-unit cost of Rs. 16 per unit for the industrial sector with a special focus on the SMEs sector. The Ministry of Finance is yet to make an official statement over this.

Adviser to the Prime Minister on Finance Dr. Abdul Hafeez Shaikh was reportedly unhappy with the concessions for the SMEs without the required spadework. He insisted that without calculating proper slabs for determining the tariff, the ECC cannot make a sound decision.

The earlier suggestion by the PM Secretariat to bring down the power tariff from Rs. 16 per unit to Rs. 8 per unit would have required a massive subsidy of Rs. 234 billion. ECC, however, proposed to reduce the tariff to Rs. 12.96 per unit for the remaining period of eight months of the current fiscal year. According to the news reports, experts believe that this will require an additional subsidy of Rs. 15 billion.

However, such decisions will have to incorporate the conditions put up by the International Monetary Fund (IMF), since unwarranted or excessive subsidies by the government can further hamper the already halted IMF program.