Despite a 40 percent hike in the power tariff since the incumbent government came to power, international donors remain dissatisfied with the government failing to increase the electricity tariff to counter the rising circular debt.
According to a report by Business Recorder, the World Bank (WB) has communicated to the Government of Pakistan that it has serious reservations about govt’s failure to increase the electricity tariff according to the February 2021 agreement.
The government had entered into an undertaking with the WB and the International Monetary Fund (IMF) in February to increase the base tariff by Rs. 3.34 per unit in two stages.
An increase of Rs. 1.95 per unit had been notified in the same month but the remaining increase of Rs. 1.39 per unit that was supposed to be implemented by 1 June 2021 had been postponed. Both the Prime Minister (PM) and the Minister for Finance had stated that the domestic and industrial consumers will not be able to bear the additional burden.
A delegation of the WB led by the Vice President for South Asia, Hartwig Schafer, had met PM Imran Khan; the Minister for Finance, Shaukat Tarin; the Minister for Energy, Hammad Azhar; the Minister for Economic Affairs, Umar Ayub Khan; and other concerned authorities last week to discuss the electricity tariff, the fuel cost adjustment (FCA), and other issues in the energy sector.
The current base tariff is already high at Rs. 2.17 per unit, and the WB is demanding another increase in it. This is a tough decision for the government as there is a political cost attached to the hike. Despite this, the adjustments in quarterly tariff monthly FCAs will continue, the news report added.
According to the initial Circular Debt Management Plan (CDMP), the government had promised the global lenders that the tariff would be increased by nearly Rs. 5 per unit by 2022. With the clear refusal of going through with this plan, now the projections of the CDMP 2021 have also derailed. This is not sitting well with the WB and the IMF.
The WB has asked Pakistan for a new CDMP, which is also not yet finalized as the Ministry for Finance has only provided an estimated figure of subsidy and an increase in the base tariff, the news report added.