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ISLAMABAD: Power Division has requested National Electric Power Regulatory Authority (NEPRA) to revise industrial power tariff and abolish Time of Use (ToU) charges in accordance with the decisions of ECC and CCoE. The government took decision to lower tariff for the industrial sector despite finance adviser's warning that provision of superfluous subsidies in power sector can create hurdles in release of next tranche from the International Monetary Fund (IMF).

The country's circular debt has already reached Rs 2.3 trillion from Rs 1.1 trillion in 2018 when the PTI took over the government. The government has not taken practical steps to reduce the circular debt. The Fund, in talks with the economic managers, has sought increase in electricity and gas tariffs to qualify for next tranche. The government has claimed that Fund's team is expected to arrive in Pakistan soon for talks on the program.

On Nov 3, it was decided that discount of Rs 4.96/kWh would be offered from the incremental marginal rate (Rs 12.96/kWh) for industrial consumer categories (B1, B2 & B3) from Nov 1, 2020 to June 30, 2021 for off-peak hours on incremental consumption basis over their consumption in corresponding months of the period March 2019 to February 2020 (the reference period is adjusted to exclude Covid-19 months). In this case, an estimated subsidy requirement will be approximately Rs 14 billion which will be provided by the Finance Division from Covid-19 economic stimulus package on actual consumption basis for each month.

It was also decided rate of Rs 12.96 /kWh may be charged for industrial consumer categories (B1, B2 & B3) from July 1, 2021 to Oct 31, 2023 for off-peak hours on incremental consumption basis over the consumption in corresponding months of the period March 2019 to Feb 2020. In this case, there is no subsidy requirement. Rate of Rs 12.96 /kWh may be charged for industrial consumer category B4 from Nov 1, 2020 to October 31, 2023 for off peak hours on incremental consumption basis over their consumption in corresponding months of the period March 2019 to Feb 2020.

In this case, there is no subsidy requirement. New industrial consumers having no reference consumption available in the period of March 2019 to Feb 2020 will be offered the same package through slab-wise consumption structure.

According to the decision industrial consumers connected with K-Electric network would avail of discount of Rs 4.96/kWh, from the base rate, which will be offered for industrial consumer categories (B1, B2 & B3) from Nov 1, 2020 to June 30, 2021 for off-peak hours on incremental consumption basis over their consumption in corresponding months of the period March 2019 to Feb 2020. In this case, an estimated subsidy requirement for K-Electric will be approximately Rs 7 billion which will be provided by the Finance Division from COVID Economic Stimulus Package on actual consumption basis for each month.

New industrial consumers of K-Electric may be offered the same package through slab-wise consumption structure; Impact of the Fuel Price Adjustment (FPA) will be passed on to the industrial consumers on incremental consumption basis. The subsidy amount will be reconciled every month on actual incremental cost/base tariff between Power Division and Finance Division.

The ECC had further decided that guidelines shall be issued to NEPRA for incorporation of the proposed package in the regulatory framework. After recommendation of NEPRA, notification of the proposed package in the official gazette will be issued by the Power Division.

The Cabinet Committee on Energy (CCoE) also decided to abolish time of use tariff. Charging of off-peak rate during peak hours will generate a revenue gap which will either have to be filled through an increase in the off peak (now flat) rates, or picked as subsidy for keeping power sector revenue neutral.

The sources said, abolishment of peak & off-peak tariff may result in redistribution of the load profile of the system, resulting in significant shrinking of the power balance of the system, jeopardizing system security that may result in load-shedding especially during the summer season of CY 2021.

Power Division is already implementing Circular Debt Management Plan (CDMP), which would result in the staggering of the upcoming generation plants (to reduce overall pool cost & circular debt), resulting in squeezed power balance especially for the summer season of CY 2021.

CCoE approved the proposal regarding abolishment of Time of-Use (ToU) tariff scheme for industrial consumers and endorsed the proposal, in principle, with the directions that abolishment of peak and off-peak tariff structure may be implemented only till April 30, 2021 and a review be carried out by March 31, 2021 for its continuation or otherwise beyond April 2021.

On Nov 26, 2020, Power Division, Section Officer Syed Mateen who is on deputation from Iesco, wrote a letter to the Registrar Nepra detailing the decisions of the ECC and CCoE, with the request that pursuant to section 7 & 31 of the Regulation of Generation, Transmission and Distribution of Electric Power Act, notifications be issued in accordance with the decisions.

Copyright Business Recorder, 2020