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Electricity Prices to Increase Further as Power Division Set to Raise Base Tariff

The Power Division has prepared a summary to seek approval from the cabinet over raising the base tariff by Rs 1.39 per unit from November 1, 2021, reported a national daily.

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This came after the government and the International Monetary Fund (IMF) reached an agreement on the proposal during meetings with the Ministry of Energy and the Power Division held last week.

The final meeting with the Finance Division was held this week and was attended by IMF officials by video.

The base tariff had already been raised by 40 percent to Rs 16.44 per unit in 2021 from Rs 11.72 per unit in 2018. The new increase of Rs 1.39 per unit will raise the base tariff to Rs 17.83 per unit. Thus, the average price of one unit will be over Rs. 20, after including taxes, surcharges, and PTV fee.

The government is expected to raise Rs. 139 billion per annum through this increase in tariff. It has allocated Rs. 330 billion worth of subsidies in the budget 2021-22, compared to a demand of Rs. 501 billion.

The sources added that a draft of the new three years Circular Debt Management Plan (CDMP) had been shared with the IMF. However, the plan will only be finalized after the federal cabinet approves it.

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The plan is expected to reduce power distribution companies (Discos) losses by 1.5 percent in three years and to make a dent in the sector’s circular debt problem.

Pakistan’s energy sector circular debt problem has persisted for years due to inefficiencies and failure to secure due payments.

According to Nepra’s State of Industry Report, during FY 2020-21, HESCO, PESCO, SEPCO, and QESCO reported losses of 38.55 percent, 38.18 percent, 35.27 percent, and 27.9 percent, respectively. While the losses of TESCO, GEPCO, FESCO, MEPCO, LESCO, and IESCO remained at 9.58 percent, 9.23 percent, 9.28 percent, 14.93 percent, 11.96 percent, and 8.54 percent, respectively

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