The Federal Government is all set to increase the base power tariff for power consumers by Rs. 4 from the start of the next fiscal year, which is 1 July 2022.
According to the details, the Cabinet Committee in Energy (CCoE) approved the revised Circular Debt Management Plan (CDMP) last week, which envisages raising the base power tariff for electricity consumers to mitigate the ever-increasing over Rs. 2.4 trillion Circular Debt (CD). This would be done simultaneously by rebasing of annual tariff and through withdrawal of subsidy for slab users from 101 units to 600 units on a monthly basis.
For users of 700 plus units, the average tariff will stand at Rs. 22.22 per unit in the fiscal year 2022-23 with effect from 1 July 2022. The government will increase the base electricity tariff by Rs. 2.92 per unit with effect from 1 July 2022 because of annual rebasing as the first raise will result in an increase of Rs. 0.75 per unit in February 2022 and the second one to the tune of Rs. 2.17 per unit with effect from 1 July 2022.
There will be another increase in power tariff because of the withdrawal of power sector subsidy under the Subsidy Reform Phase-II envisaged under the IMF conditions whereby the unprotected slabs of power tariff from 101 to 200 units will go up from Rs. 10.18 per unit to Rs. 10.36 per unit, witnessing a surge of Rs. 0.18 per unit.
For slab users from 301 to 400 units, the tariff will go up from Rs. 14.78 per unit to Rs. 15.73 per unit, registering an increase of 0.95 per unit. For slabs from 501 to 600 units, the prices of electricity will increase from the existing tariff of Rs. 17.16 to Rs. 18.11 per unit, an increase of Rs. 0.95 per unit. For power slab users of 700 units plus, the tariff will remain unchanged at Rs. 22.22 per unit with effect from 1 July 2022.
According to revised CDMP, the power tariff will go up by Rs. 2.92 per unit on account of annual re-basing of the average tariff as Rs. 0.75 per unit will be increased in February 2022, keeping in view higher devaluation of Pak Rupee against US Dollar and another Rs. 2.17 per unit annual re-basing in coming July 2022.
However, this revised CDMP possessed major risks as the POL prices have increased manifold, so the prices of cash bleeding power sector may go up beyond Rs. 5 per unit at least, in the wake of the country’s increased reliance on the fuel-based power generation against revised CDMP for hiking tariff of Rs. 2.92 per unit. The POL prices stood at $75 per barrel at the time of preparation of the revised CDMP, but now, it has gone up to $95 per barrel in the international market. The fuel price adjustment had gone up from Rs. 1 to Rs. 4 in the wake of a surge in fuel prices in the international market.
“The annual rebasing of Rs. 2.17 per unit will increase the electricity prices in next fiscal mainly because of the addition of new capacity in the system,” the revised CDMP has estimated, which was approved by the government.
It also warned that with the baseline scenario, the consumer tariff will go up to Rs. 21.04 per unit during the next fiscal year (FY2023) from Rs. 18.99 per unit in the last fiscal year 2021. At the time of preparation of CDMP in FY2021, the average tariff of electricity stood at Rs. 16.44 per unit. In the revised plan for FY2022 and FY2023, the consumer rate will go up to Rs. 18.37 per unit at the end of PTI-led regime five-year term, Rs. 18.09 per unit during the current fiscal year FY2022.
The plan envisages that all quarterly tariff adjustments and tariffs determined for FY2021 to FY2023 have been notified, as the quarterly tariff adjustment (QTA) for FY2020 of Rs. 0.83 per unit will enable the collection of Rs. 51 billion in FY2022 and Rs. 31 billion in FY2023. The notification of QTAs of FY2021 of Rs. 0.90 per unit in October 2021, Rs. 0.07 per unit, and Rs. 0.24 per unit will result in a recovery of Rs. 37 billion in FY2022 and Rs. 20 billion in FY2023.
The notifications of QTAs for December 2021 at the rate of Rs. 0.32 per unit and Rs. 0.22 per unit in February 2022 will have an impact on the collection of Rs. 24 billion in FY2022 and Rs. 28 billion in FY2023.
The notification of tariff-rebasing in November 2021 at the rate of Rs. 1.39 per kWh will result in an improved collection of Rs. 86 billion in FY2022 and Rs. 66 billion in FY2023. With a tariff hike of Rs. 0.75 per unit in an ongoing month as annual rebasing in tariff, the CDMP envisages a collection of Rs. 23 billion in FY2022 and Rs. 62 billion in FY2023. With a tariff increase of Rs. 2.17 per kWh in July 2022, the CDMP plans an improved recovery of Rs. 203 billion in the next fiscal year FY2023.