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ISLAMABAD: The Power Division has reportedly not firmed up any proposal to raise power tariff by Rs 7.50 per unit, as is being demanded by the International Monetary (IMF) to bridge the gap of over Rs 700 billion due to failure in achieving the agreed targets, well informed sources told Business Recorder.

“Different proposals are under active discussion at the higher level to increase electricity tariff as per commitments with the Fund including alteration in NEPRA Act to impose debt service surcharge,” the sources added.

Presently, the government is recovering debt service surcharge at Paisa 43 per unit which will be increased to Paisa 96 per unit which implies additional Paisa 53 per unit surcharge will be imposed.

The sources said the government has decided to bear the financial burden of Rs 75 billion against non-recovery of flood affected domestic consumers using 200 units for two months. However, the impact of the rupee depreciation will have massive impact after interbank rate of Rs 255/$ against government’s assumption of Rs 190/$.

IMF wants up to Rs7.50/unit power tariff raise

National Electric Power Regulatory Authority (Nepra) will also have to rebase its tariff due to massive depreciation of Pak Rupee as payments are to made to foreign lenders in dollars.

Official documents reveal that the government has assured IMF that recovery will be 93.83 percent, but in fact it remained less than 90 percent (FY-22 at 90.43 percent). Transmission and Distribution losses were greater than 17 percent (FY-22 at 22.16 percent) against the commitment of 15.83 percent, made with the IMF and World Bank.

Electricity demand remained depressed at 44 billion units during first quarter of current fiscal year (FY-22 at 44.4 percent) whereas IMF had been given the understanding of 45 billion units.

According to sources, the government has extended subsidy of Rs 281 billion to K-Electric despite the fact that it was not budgeted.

IMF had also been given assurance that exchange rate for last fiscal year would be Rs 194/$ which remained at over Rs 200/$. Likewise, the Fund had been given the pledge that KIBOR would be 10.5 percent while in fact it remained at 15 percent.

The government has also approved additional subsidies to the power sector of over Rs 200 billion despite the fact that IMF has clearly indicated that it would not allow any subsidy except those targeted to the poor segment of society.

The sources said the government staggered Fuel Cost Adjustment (FCA) in violation of commitments with the Fund and World Bank.

The sources said power sector budgeted requirement was of Rs 1.734 trillion whereas the government budgeted only Rs 570 billion.

Copyright Business Recorder, 2023

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