By Staff Reporter
ISLAMABAD: Pakistan’s electricity regulator approved a 20 percent hike in the base power tariff for the fiscal year starting July 1, as the South Asian nation implements reforms agreed with the International Monetary Fund in the recently approved $3 billion loan program.
The National Electric Power Regulatory Authority said on Friday that it has allowed a Rs4.96 ($0.03) per unit increase in the average tariff, which will raise the annual revenue of the distribution companies by Rs3.281 trillion.
The new tariff will be effective from July 2023 and will apply to all consumer categories, except for lifeline consumers who use up to 50 units per month.
The tariff hike is part of the IMF’s demand for Pakistan to eliminate power subsidies and reduce its fiscal deficit, which widened to 4.6 percent of gross domestic product in the fiscal year ended June 2023.
The IMF has also urged Pakistan to improve the efficiency and governance of the power sector, which is plagued by high losses, circular debt, and overcapacity.
The regulator said that it has considered various factors in determining the tariff, such as low sales growth, currency depreciation, inflation, interest rates, and new power projects.
It also said that it will pass on any relief to consumers in case of favorable changes in these factors in the future.
The government has the option to apply a uniform tariff across all distribution companies and K-Electric Ltd., the sole power supplier in Karachi, the country’s largest city. The government can also provide subsidies to certain consumer groups or regions through surcharges or cross-subsidies.
The tariff increase will add to the inflationary pressures in Pakistan, where consumer prices rose 29.4 percent in June from a year earlier. The higher power costs will also hurt businesses and households, who are already facing challenges due to the beaten-up rupee and its impact on the prices.
The power sector is one of the main sources of Pakistan’s circular debt, which refers to the accumulation of unpaid bills by consumers, distributors, and producers. The circular debt reached Rs2.64 trillion as of June 2023, according to the finance ministry.
Copyright © 2021 Independent Pakistan | All rights reserved
