NEPRA Approves Rs. 3.82 Per Unit Surcharge on Electricity on IMF Demand

The National Electric Power Regulatory Authority (NEPRA) on Monday approved the government’s decision to levy Rs. 3.82 per unit surcharge on electricity on the demand of the International Monetary Fund (IMF).

The levy is aimed at financing the debt servicing costs of the power sector in order to reduce circular debt. It has been panned out for 4 months beginning March 1 and then continuing at a lower rate of Rs. 1.43 per throughout the next fiscal year.

“In view thereof, the authority has decided to allow the application of the surcharge to be recovered from different categories of consumers (of ex-Wapda Discos and K-Electric) for the period from March to June 2023 and for 2023-24, to cover the markup charges of Power Holding Ltd (PHL) loans”, the regulator during a public hearing last week.

The government will now issue a formal notification on the surcharge of 43 paisas per unit for agricultural and residential consumers using up to 300 units. Above 300 units, all other consumer categories in the domestic sector, including commercial, industrial, general services, bulk, and others, would pay a surcharge of Rs. 3.82 per unit. The application of the surcharge will be the same for ex-Wapda distribution companies and K-Electric consumers.

The total impact of the surcharge in the next fiscal year is expected to be Rs. 335 billion. Moreover, with these supplemental surcharges, an additional amount of Rs. 75 billion will be billed for the March-June period, of which approximately Rs. 68 billion will be retrieved at a recovery rate of 90 percent.

Pertinently, the IMF has asked Pakistan to withdraw unbudgeted electricity subsidies for exporters and other sectors from its revised CDMP plan prepared by the Power Division and further urged the government to fill the Rs. 675 billion unbudgeted gaps in power subsidies with higher electricity tariffs and other revenue-generating measures.

The lender seeks action on 4 crucial conditions for reaching a staff-level agreement by next week. One of these conditions is the continuation of surcharge on electricity consumers. Lawmakers negotiating on behalf of Pakistan have called these prior actions ‘unjustified’.

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