Govt may overhaul system of electricity billing

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Govt may overhaul system of electricity billing

ISLAMABAD: After warnings from IMF over subsidies in power sector, the government is expected to approve restructuring of electricity billing system to increase revenues but at the same time protect the low- and middle-income groups from the impact of enhanced tariff.

Sources in the ministry of water and power told Dawn that a proposal would be submitted to the government calling for eliminating subsidies for high-end users by not offering the lower slab rates to consumers utilising more than 300 units.

“It is no longer viable to give subsidy to everyone and instead the government has to offer targeted subsidy,” an official said, adding that Pepco purchased electricity at more than Rs9 per unit, but the tariff for households for up to 100 units was Rs4.2, Rs6.34 for between 100 and 200 units and Rs10.24 for up to 300 units.

At a recent meeting, the Pepco said the electricity sector was facing an annual shortfall of 48 per cent which amounted to around Rs180 billion.

The finance ministry has suggested that the subsidies applicable to lower slabs should be abolished for the high-end users.

“This way the indirect subsidy being utilised by all those who can afford it, including ministers, ambassadors and rich people, would be eliminated and the subsidy to targeted consumers will continue,” the official added.

The government has allocated a subsidy of Rs84 billion in the budget for 2010-11 that includes Rs40 billion for interest payment of Terms Financing Certificate (TFC), Rs10 billion for Fata and Rs30 billion for life consumers using up to 50 units per month but the tariff differential of Pepco accounts to more than Rs180 billion.

“Practically it is not possible to increase power tariff to this extent,” said a senior official of the finance ministry, adding that it would be a difficult decision for the government.

The government is under immense pressure from IMF to abolish power subsidy and reduce the existing gap between power production cost and tariff.

The official said the economic managers of the country would try to convince the IMF that any increase in power tariff under these circumstances was not possible.

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