Circular debt reason behind increase in power tariff: Hammad

Federal Minister for Energy Hammad Azhar announced on Friday that the government has decided to increase the power tariff due to the mounting circular debt.

The increase in power tariff of Rs1.49 will be applicable from November 1, Hammad said, while addressing a press conference in Islamabad.

"This increase in power tariff will not be applicable to the lifeline and domestic consumers – who use less than200 units of electricity – hence, this increase is not applicable on 46% of the consumer base," he clarified.

Govt to increase power tariffs on 'gradual basis’, says Tarin

Talking about the issue of circular debt, the minister blamed the previous governments.

“We have to increase the power tariff," he said.

Business Recorder reported earlier that after an understanding with the IMF, the Power Division has prepared a summary for the Federal Cabinet to seek a final nod for further raise in base tariff from November 1, 2021.

"We now have the capacity to generate enough electricity and we are focused on increasing the demand," Hammad said.

"We introduced an industrial package last year which has been successful as we have seen a 15% increase in demand," the minister said.

"Meanwhile, we have also seen a 6-7% increase in the demand for electricity as the peak hours for the industrial sector have been removed."

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The minister said that the government decided to introduce a seasonal electricity package that would offer discounts to consumers using extra units compared to their last year's usage.

Hammad further said that the government has closed old generation companies (Gencos), while the National Electric Power Regulatory Authority (NEPRA) has also revised its target from 15% to 13%.

"Despite all this, there is a difference between Rs1.5 to Rs2 in the rate at which the government is purchasing and selling electricity — this is the reason behind surging circular debt," he said.

‘Govt increased average power tariff by over 40pc in 3 years’

Earlier, Finance Minister Shaukat Tarin said that the government will increase power tariffs in a "gradual manner", adding that there is a dire need to improve the efficiency of the country's energy sector.

Tarin, who is in the US to attend the World Bank and IMF annual meetings, made these remarks during a session arranged by the United States Institute of Peace on ‘Pakistan’s Economic Future’.

Power tariffs form a major part of the IMF's talks with Pakistan that is seeking a successful review of the Extended Fund Facility that would pave way for a billion-dollar inflow.