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Power consumers in for another shock

ISLAMABAD: The government and lending agencies have agreed to gradually do away with lower slab benefits given to all categories of electricity consumers to increase the average sale price by 30 per cent to Rs9.24 per unit from the current Rs7.09 per unit.

elctricity pakistan newsInformed sources told Dawn on Wednesday that under the plan, domestic consumers would get benefit of only one lower slab because their monthly consumption had increased. The current formula allows the benefit of lower tariff of all slabs to high-end consumers.

The slab restructuring will cost the consumer about Rs17 billion a year. This will be in addition to a 2-3 per cent increase in tariff to be effected every month during the remaining period of the current fiscal year. It will yield an additional revenue of about Rs33 billion for power companies.

The sources said that Finance Minister Dr Abdul Hafeez Shaikh, who is leading the Pakistani side in negotiations with lending agencies, had also taken the PPP leadership into confidence on Wednesday about Islamabad’s fluid relationship with international lenders.

He said the IMF had been holding back the disbursement of $3.6 billion to Pakistan since May this year because of major slippages on policy commitments and, resultantly, other lenders were hesitant to allow financial flows even after the devastating floods.

A bill on reformed general sales tax, likely to be submitted in parliament soon, would withdraw all tax exemptions while the full energy cost had to be recovered from the consumer to reduce burden on the national exchequer, a source quoted the minister as telling the PPP leadership.

At present, the first 100 units are charged at Rs4.28 per unit, followed by Rs6.47 per unit for 101-300 units, Rs10.44 for 301-700 units and Rs13.03 for above 700 units.

With the application of the new slab system, consumers using more than 700 units per month will be charged at a rate of Rs10.44 per unit for the first 400 units and at Rs13.03 per unit for the remaining portion of the bill.

Agricultural consumers will get the benefit of only two slabs, while fixed charges will be applied to the sanctioned load.

The government has given an undertaking to lenders that the water and power ministry will issue the required policy guidelines for the purpose to the National Electric Power Regulatory Authority (Nepra) this month.

With these measures in mind, lending agencies and the government have estimated that about Rs120 billion of generation cost to recovery gap would turn into a Rs15.4 billion surplus by July next year when an amendment to the Nepra act would empower the regulator to directly pass on monthly adjustments in generation and distribution cost to the consumer.

According to the sources, the government and lending agencies also agreed to increase gas supplies to the power sector from the current 183mmcfd (million cubic feet per day) to 300mmcfd and to allocate all new gas finds, including fresh flows from Kunar-Pasakhi, to the sector on a fast track basis.

The two sides also agreed to convert Rs175 billion of new circular debt into term finance certificates to save interest charges by about 200 basis points.

This is in addition to about Rs301 billion of power companies debt which had been transferred to the state-owned Power Holding Company.

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