ISLAMABAD: The federal government has increased power tariff across the board by 2 percent with immediate effect after a formal agreement reached with the International Monetary Fund (IMF) on Friday. "Yes, we have increased power tariff by 2 percent which will be notified on Saturday (today)," Ehsan Akhtar Malik, Additional Secretary Ministry Water and Power told Business Recorder on Friday night.
We have imposed 2 percent surcharge on electricity to implement the agreement reached with the IMF," said another official on condition of anonymity. According to him, fresh summary will be submitted to the Prime Minister for two percent surcharge in April. In reply to a question, he said that notification was ready before he left the office, however, there was some delay in its vetting due to some legal issues.
Asked if notification would be issued on Friday night, he replied in negation, saying that it will be done on Saturday. The government has agreed with the IMF to increase 6 per cent tariff ie 2 per cent in March, 2 percent in April and 2 percent in May 2011.
On February 26, 2011, a senior official of the Ministry of Water and Power had informed this correspondent that the government will extend Rs 30 billion subsidy every two months to keep power tariff frozen at least till June 2011. However, after 10 days long talks with the IMF mission, the government changed its earlier plans mainly to minimise subsidy on power sector and to pass on the tariff differential to the consumers in remaining months of the current fiscal year.
Finance Minister, in his budget speech in June 2010 had announced that the government has earmarked Rs 30 billion as power tariff subsidy for the current financial year 2010-11. However, Ministry of Water and Power claims that the amount for power sector subsidy was Rs 1 40 billion for Pepco and Rs 40 billion for the Karachi Electric Supply Company.
The government had earmarked Rs 84 billion in the federal budget 2010-11, of which Rs 10 billion were for the Federally Administrated Tribal Areas (FATA), Rs 30 billion for tariff differential, Rs 4 billion for General Sales Tax (GST) refund and Rs 40 billion to pay interest on Term Finance Certificates (TFCs) issued by the Power Holding Company Limited (PHCL).
Last year, initially Pepco had projected Rs 265 billion shortfall which was reduced to Rs 239 billion, however, after two per cent increase in power tariff the projected shortfall declined to Rs 196 billion for the whole year. "If we divide Rs 196 billion over 12 months, the government has to extend a subsidy of around Rs 16.3 billion per month to keep tariff unchanged or increase tariff by 50 paisa unit in addition to monthly fuel adjustment," the official said, adding that the government went for the second option due to financial constraints.