Electricity Prices Facing Another Hike Following Rs. 20 Billion Subsidy Withdrawal

Power consumers are likely to face another increase in power tariff up to Rs. 0.95 per unit following a decision of the government to withdraw a subsidy worth Rs. 20 billion

The National Electric Power Regulatory Authority (NEPRA) on Monday held a public hearing relating to approval of Policy Guidelines under section 31 of Regulation, Generation, Transmission, and Distribution of Electric Power Act, 1997 for Retargeting of Power Sector Subsidies Phase–II.

The federal government had filed a petition before National Electric Power Regulatory Authority (Nepra) to approve policy guidelines to withdraw an Rs. 20 billion subsidy in the second phase of the subsidy reduction plan.

In the first phase, the government had also split different slabs by creating new ones to reduce subsidies for power consumers. In this phase, the government had withdrawn Rs. 42 billion subsidies per annum. The government had removed around 8 million power consumers from the subsidy net by reducing volume from 22 million to 13.9 million consumers.

Now, under the second phase, the government was going to remove more consumers from the power subsidy network by withdrawing Rs. 20 billion per annum subsidy. An official of the Power Division informed during a hearing that currently the government is providing Rs. 238 billion in subsidies to power consumers. The nonprotected consumers are getting Rs. 197 billion in subsidies, and the government wants to bring a reduction of Rs. 20 billion in it. To recall, protected consumers are getting Rs. 71 billion in subsidies, the official added.

Member NEPRA Sindh, Rafiq Ahmad Sheikh noted that for the consumers using more than 300 units of electricity, the increase is Rs. 0.95/unit while for the consumers using less than 300 units the increase is up to Rs. 0.48/unit.

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The NEPRA had pointed out that the provision of subsidy is the mandate of the Government of Pakistan. The proposed increase would result in a reduction in subsidy by Rs. 20 billion. It said that the Ministry of Energy (Power Division) had devised a subsidy reform program, approved by the Economic Coordination Committee (ECC) of the federal cabinet, to be applied in three phases after NEPRA’s approval.

The power regulator had approved the first phase and notified with effect from October 1, 2021. Under this program, the power regulator expanded the definition of lifeline consumers. It approved a new category of protected consumers having consumed up to 200 units consistently for six months.

Earlier under phase-I, the regulator had approved breaking the 301-700 slab into four slabs — 301-400, 401-500, 501-600, and 601-700. Each of these slabs continues to get the previous slab benefit of a 300 kWh slab. However, for the unprotected consumers using 1 to 700 units/month, the tariff will go up from Rs. 0.08/unit to Rs. 0.95/unit.

For the unprotected consumers using 1-100 units, the increase will be Rs. 0.08/unit, for 101-200 it will be Rs. 0.18/unit, for 201-300 the hike will be Rs. 0.48/unit and for the categories using 301 to 700 units the per unit increase will be Rs. 0.95/unit.

The decision will take the base tariff of the consumers using up to 100 units from the existing Rs. 9.42 to Rs. 9.50/unit, of 101-200 units from Rs. 10.18 to Rs. 10.36/unit, of 201-300 from Rs. 12.14 to Rs. 12.62/unit, for the consumers with 301 to 400 units from Rs. 14.78 to 15.75/unit, for 401 to 500 units from Rs. 16.24 to Rs. 17.19/unit, for 501 to 600 units from Rs. 17.16 to Rs. 18.11/unit, and for 601 to 700 units it will increase from the existing Rs. 17.80 to Rs. 18.75/unit.

For the consumers using above 700 units, there will be no change and the base tariff would remain at Rs. 22.22 per unit. As per the petition, phase II of the subsidy reforms entails a gradual reduction in total net subsidy for unprotected residential consumers, reduction in cross-subsidy, and removal of previous slab benefit.

During the hearing, Chairman NEPRA, Tauseef Farooqi said that we are sitting here only for the protection of consumers. NEPRA has fixed a tariff, to give subsidy or withdraw subsidy, its government’s decision. Chairman NEPRA said that the government is levying at least a 21 percent tax on consumers in the bill. He says that on the tax collection matter, I myself have asked the finance minister that this is not a tax-collecting department. The finance minister has promised to look into the matter.

After the detailed deliberations and analysis of the data, the NEPRA will announce the decision later.

Faiz Paracha is a seasoned broadcast journalist with over 15 years’ experience in reporting and e...

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