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ISLAMABAD: The incumbent government is said to have increased unified weighted average tariff by Rs 1.80 per unit, i.e. from Rs 11.75 per unit in the PML (N) tenure to Rs 13.55 per unit and with another expected increase of Rs 1.95 or Rs 1.97 per unit, the total increase will be around Rs 3.76 or Rs 3.77 per unit.

Initially, the PTI government increased average tariff by paisa 21 per unit to take the average tariff to Rs 11.95 per unit, in addition to quarterly tariff adjustments of Rs 1.59 per unit. This increase will be in addition to monthly fuel price adjustments. The national average tariff in the dying years of PPP government was over Rs 10 per unit, which the PML (N) government increased to Rs 11.75 per unit.

Informed sources told Business Recorder that the forthcoming increase in tariff is not based on any efficiency in the system, adding that very insignificant improvement of Rs 20 billion pre-Covid was witnessed in the system with recovery during the tenure of former Secretary Power, Irfan Ali who had suggested that the increase must be staggered so that impact is passed on to the consumers in phases. However, his suggestion was ignored at that time, but now the same formula is being applied.

The upcoming increase in tariff is mainly due to depreciation of Pak Rupee and increase in capacity payments to the power plants initiated during PML (N) government but with generation commencing during the PTI government.

The Nepra's determined increase is Rs 3.34 per unit in tariff with Rs 2.30 per unit increase on account of capacity payment.

"This is an increase in liability rather than tariff increase as no improvement has been witnessed in sales growth due to Covid -19," said an official. However, after the announcement of recent package for industry, improvement in electricity sales is being reported by the power Distribution Companies.

The capacity payment charges of Rs 850 billion were paid by t he government to the power projects as of June 30, 2020, which were Rs 250 billion in 2013.

The sources said, the country's capacity payment is likely to touch Rs 1 trillion in June 2021, which translates into Rs 10 per unit sans Discos margin or inefficiency and includes energy cost of Rs 5.50 per unit with the per unit cost of Rs 15.50 i.e. capacity and energy cost.

In January 2019, the government notified the consumer tariff for various categories in ten distributions companies (Discos) via SRO1 (I)/2019 to SRO12 (I)/2019. Instead of a national average unified tariff of Rs. 15.53 per unit, the government notified the average unified consumer tariff of Rs. 11.95 per unit. The difference was left to be covered through subsidies. In one year the government increased prices three times for all consumer categories except for domestic consumers below 300 units and imposed two surcharges to cover deficits.

According to a study since FY2013 about Rs 2.6 trillion has been injected into the power sector as equity adjustments to clear circular debt. In addition, about Rs 3.1 trillion has been injected as subsidy since FY2007.

A senior government official stated that increase in tariff is a very difficult decision for the government at a time when political upheaval is at its peak but the International Monetary Fund (IMF) is not willing to restart talks on the program, until this condition is met.

Power Division and Finance Division were agreed to an increase of over Rs 2 per unit but Prime Minister gave the direction that the increase must be less than Rs 2 which is the reason why the increase is projected to rise by between Rs 1.95 per unit to Rs 1.97 per unit.

Copyright Business Recorder, 2021

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