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If you thought recent annual base tariff adjustment would put an end to the misery, think again. The power regulator will soon be deciding on the fourth quarterly adjustment for FY23, which in all likelihood, is going to add a colossal Rs4/unit in lieu of quarterly tariff adjustment, to be collected between October and December 2023.

If approved, this would be the single largest quarterly adjustment ever – that aims at collecting Rs144 billion – as capacity and system of use charges overruns continue to run havoc. This is an addition to Rs106 billion adjusted already on account of periodic adjustments in 9MFY23 – taking the toll to an extraordinary Rs250 billion or Rs2.27 per unit, for the year.

The adjustment likely to go in effect from October coincides with the PHL surcharge adjustment that changes drastically from, November onwards. For context, all unprotected consumer categories would be paying Rs3.23/unit in PHL surcharge, which is 7.5 times increase over previous month for the first three consumption slabs (more than 90 percent of all consumers). Almost Rs120 billion for FY23 have already been adjusted on account of monthly Fuel Charges Adjustment (FCA) at an average of Rs1.1/unit.

For now, the year-on-year increase in electricity tariffs as calculated by the Pakistan Bureau of Statistics has remained in single-digits – but that will change soon. The PBS shortcomings on tabulating tariff changes aside, the base effect of substantially high monthly FCA last year in July-August would come into play – and the effective year-on-year increase could well be north of 30 percent from September onwards.

On the quarterly adjustment, over 80 percent owes to overruns in capacity charge component. Unfavorable currency movement was the killer blow, given the indexation of tariffs to USD and US CPI. What has matters worse is the drop in demand, that has inflated the impact in unitary terms. Come November 2023, the final consumer tariff inclusive of taxes, duties, surcharge and adjustment – would read Rs30/unit for the first consumption slab of up to 100 units in the unprotected category – a 50 percent increase from a year ago. The highest consumption slab of 700+ units would have an effective tariff of Rs60.5/unit in two months.

While on paper, it may make all the sense to pass on all adjustments and hope for the circular debt buildup to stop. But at tariffs as high as these, and economic growth pickup nowhere in sight – expecting that would be a big mistake. If anything, system losses are all set to go higher and recovery lower – to add to the starting point of circular debt accumulation, which could be close to Rs300 billion per annum – without any delays in adjustments, or unpaid subsidies, or unsettled account to power producers by the government. Taxation on electricity is not often talked about as much as petrol, but it is fast reaching that point. Almost a quarter of the billed amount goes in various kinds of taxes. If the government is serious is putting the energy house in order, it would not hurt to get the taxation house in order first. Squeezing the last drop of whatever juice is left there would not work – it could rather backfire.


Comments are closed.

Haq Aug 09, 2023 03:44pm
Till economy & masses are completely choked to death / bankruptcy
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Qasim Aug 09, 2023 06:40pm
Still no one talks about the free electricity handed out to the government. Why do the people of Pakistan enjoy being trampled on so much?
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Sagar Baloch Aug 10, 2023 12:48am
Don't worry,People in Pakistan are one step ahead of Govt.those who are living fairly will soon realize they can't live in pakistan if they keep paying taxes fairly.i hope you get my point.
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