Cheap power during winter months: Package for industry on the cards

ISLAMABAD: The federal government is working on a four-month “winter package” for industry on incremental consumption basis aimed at providing cheap electricity during the winter months, which will not only improve industrial growth but also reduce burden of capacity payment of power plants, well informed sources told Business Recorder.

The winter package will be applicable across the country including K-Electric jurisdiction, after formal approval of the federal cabinet and International Monetary Fund (IMF).

The impact of incremental package will be around Rs 25 billion but the key question remains: who would pay this cost as the government cannot adjust this amount in subsidy due to restrictions imposed by the IMF and World Bank.

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SIFC has directed Power Division, Finance Division, Commerce Division and Chairman FBR to present a financial plan in the Executive Committee for introducing industrial tariffs based on the cost of service to tackle the issue of cross subsidy for domestic users which is eroding competitiveness of exports.

Secretary Power, Secretary Commerce and Secretary Finance have been directed to devise a mechanism to reduce the cost of electricity involving: (i) implementation of wheeling at the cost of one cent per unit and (ii) constitute a committee on capacity charges and debt restructuring of power sector.

On Monday (today) a meeting will be held in Power Division to discuss outlines of proposed winter package for the industry to use cheap idle capacity on incremental basis. The rate and duration for incremental winter package will also be finalised before submission of a formal proposal to the Economic Coordination Committee (ECC) of the Cabinet.

Experts have also suggested the government to expand the winter package to domestic consumers, as well, so that they can use electricity for heating due to non-availability of gas.

In 2020, to address this issue, a discount on incremental consumption namely “Use more Pay Less Package” was offered for the period of November 2019 till February 2020 by offering a rate of Rs 11.97/KWh for incremental consumption. The discount was available to domestic, commercial & industrial consumers of Discos and yielded a growth of 16% in consumption.

According to the Power Division, previous industrial support package had resulted in substantial growth in consumption of electricity - 4.29% in November 2020 to around over 18% in June 2021.

Keeping in view the expected future benefits, the Power Division will submit that going forward, based on the existing trends, a growth of over 25 % for Discos and over 35 % in K-Electric system is expected in 2023-24.

The Power Division has also acknowledged that sufficient power balance is available in winter months, which can be utilised as the package will not have a negative impact on fiscal balance as extra electricity is being generated which will be consumed in four winter months.

Karachi Electric, sources said, will also submit that there would not be any load management in its system due to the implementation of the industrial package, as the incremental demand would be managed through utilisation of own fleet, as well as, through incremental utilisation from national grid.

The sources said, All Pakistan Textile Mills (APTMA) Punjab is also urging the government to dedicate entire electricity generated from RLNG-fired Balloki power plant to it or sell the plant to it.

The caretaker Minister for Commerce and Industry, Gohar Ijaz, Patron in Chief APTMA recently held a detailed meeting with the caretaker Minister for Energy, Muhammad Ali wherein purchase of Balloki power plant also came under discussion.

An official privy to this meeting told this scribe that there is cross subsidy of Rs 7 per unit and queried that if a plant is sold to APTMA then who would meet this shortfall. Another official stated that the government cannot recover amount from members of APTMA, individually.

Copyright Business Recorder, 2023