ISLAMABAD: Power Division has estimated a reduction of net subsidy by 30 percent to Rs 168 billion from Rs 240 billion, after notification of increase of Rs 1.39 per unit in base tariff of Discos and KE.
Power Division, in its summary to the Cabinet, approved through circulation, to be shared with IMF and World Bank, explained that in pursuance of guidelines approved by ECC, NEPRA has been determining uniform tariff to be charged from consumers, including the impact of subsidy and inter Disco tariff rationalization/cross-subsidies, under the NEPRA Act, 1997.
The latest uniform tariff in field for Discos was determined by the Authority through its determination on February 12, 2021 and notified on February 12, 2021.
The uniform tariff determination and consequential applicable variable charge notified, after accounting for tariff rationalization, tariff differential subsidy and cross subsidies, specifically envisage and provide for net subsidy to the tune of Rs 185 billion only to various categories of consumers.
The SROs also specifically provide that modification in the subsidy may be reflected in the relevant Schedule of Tariff through the applicable variable charge. The Authority, through its determination dated September 23, 2021, in respect of Policy Guidelines of the Federal Government approved modification/adjustments in the Discos Schedule of Tariffs and terms & conditions thereof with regard to creation and/or re-categorization of various consumer categories. Consequently, tariffs of all Discos forming part of Authority's determination of February, 12, 2021 were modified/amended.
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The determination of the Authority has been notified vide SROs 1280 to 1289 of October 1, 2021. Consequently, after accounting for tariff rationalization, tariff differential subsidy and cross subsidies, such amendments/modification will result in net required subsidy to the tune of Rs 240 billion only to various categories of consumers.
National Electricity Policy, 2021 approved by the Council of Common Interests (CCI) provides that financial sustainability of the sector is premised on timely recovery of full cost of service and in due course financial self-sustainability will eliminate and minimize the need for government subsidies except to the limited extent specified as per the prevailing government considerations.
Accordingly, based on the consolidated revenue requirements of Discos as well as the economic and financial policy of the Federal Government, the Tariff Differential Subsidy (TDS) has proposed to be modified and reduced.
This modification in the targeted subsidy is proposed to be given effect alongwith modification of inter Disco tariff rationalization/cross subsidies per practice in vogue duly approved by NEPRA through modification of the applicable variable charge of categories of consumers of Discos. This would effectively pass on average Rs 1.39 per unit to the consumers, remaining within the revenue requirements of Discos as per NEPRA determination. Upon requisite approval of NEPRA, notification in the official gazette shall be made to the extent of modification, with effect from November 1, 2021.
Power Division has apprised that for the period Jul-Oct 2021 the net subsidy amounts to Rs 102 billion and the net subsidy for Nov 21, to Jun 2022 shall amount to Rs 67 billion. In aggregate the subsidy requirement will be reduced from Rs 240 billion to Rs 168 billion.
Copyright Business Recorder, 2021
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