The government has issued a three-part power subsidy rationalization plan on Monday.
According to a report by Business Recorder, the new plan is progressively taxed, which means that it decreases the number of non-Time of Use (ToU) beneficiaries (domestic consumers) across the country and introduces new slabs that increase the tariff of the consumers who use over 200 units per month.
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Nearly 99 percent of domestic consumers (24.5 million) are currently receiving subsidy benefits, and the Power Division (PD) argued that the subsidy should only be based on the socio-economic status of the consumers. Its statement detailed that the system is protecting consumption (84 percent) below 300 units, which makes up for 89 percent of domestic consumption (22 million).
The subsidy may be abolished in the long run as the PD suggested that the subsidies to the vulnerable groups be delivered in cash based on identification through the Ehsaas program.
The NEPRA questioned the financial impact of the new policy guidelines on the consumers and distribution companies (DISCOs), and whether the policy will be implemented retrospectively or prospectively.
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The Central Power Purchasing Agency (CPPA-G) wants the immediate implementation of the subsidy phasing out plan without waiting for determinations of DISCOs for FY 2021-22, the news report added.
The new plan includes:
- An expanded definition of the lifeline consumers to include residential Non-ToU consumers with a maximum of last 12 months and the current month’s consumption of 100 units;
- Two rates for 50 and 100 units will continue;
- The creation of a new category of protected customers (those consuming 200 kWh per month consistently for the last six months);
- Breaking the 301-700 slab into four slabs – 301-400, 401-500, 501-600, and 601-700 – with the same marginal tariff;
- Each of these slabs will continue to get the previous slab benefit of 300 kWh slab as today;
- Such an adjustment be reflected through modification in SRO Nos. 374(1)/2018 to 383(1)/2018 of 22 March 2018 as modified by SRO Nos. 01 to 10 of 2019 of 1 January 2019 and SRO Nos. 182(1)/2021 to 191(1)/2021 of 12 February 2021.
The second phase of the plan envisages a gradual reduction in the total net subsidy and cross-subsidy. It also removes the previous slab benefits and reforms the subsidies towards the solarization/modernization of tube wells.
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In the third phase, the number of slabs for residential consumers will be reduced further, and tariffs will be adjusted for industrial, commercial, and agriculture slabs to have zero net subsidies. The FATA and AJK subsidies will also be de-linked from the electricity tariffs in this phase.
Joint Secretary (Power Finance) Mehfooz Bhatti informed the attendees of the meeting that the entire plan will be implemented within five years.
The new rationalization plan was discussed at a public hearing at the National Electric Power Regulatory Authority (NEPRA) that was attended by the NEPRA Chairman, Tauseef H. Farooqi, and other officials. During the hearing, the Power Division was represented by Chief Executive Officer (CEO)/Additional Secretary (Power Division) Waseem Mukhtar, Joint Secretary Mehfooz Bhatti, Naveed, and Mateen Bukhari.
