As part of an election strategy to attract voters, the government is considering freezing the power tariff until the next general election is held, setting aside concerns of multilateral donors.
The government is following a comprehensive package to provide relief to the consumers before upcoming election by ending load-shedding, reducing gas prices and freezing power tariff, say government officials.
In this connection, the Economic Coordination Committee (ECC) has already approved a new gas allocation policy aimed at maximising supply to power plants to overcome load-shedding.
The government has also made a massive reduction in gas prices by up to 51% for residential consumers for six months from July to December. Now, a plan is under consideration to keep power tariff unchanged for the time being.
This move runs contrary to the suggestion of donors like the Asian Development Bank (ADB) and World Bank, who have been insisting on doing away with tariff subsidy. However, the government is inclined towards taking political decisions to avoid public criticism.
“The government does not want to increase electricity tariff before the general election in order to win sympathies of voters,” an official of the Ministry of Water and Power told The Express Tribune.
However, the National Electric Power Regulatory Authority (Nepra) will continue to pass on the impact of international crude prices to the electricity consumers. The base tariff may not be increased.
At present, the gap between the cost of power production and the price being charged from the consumers is very wide at around 40%. Power is being produced at Rs11.89 per unit, but is being sold at Rs8.88 per unit, with the government paying Rs3.01 per unit to power producers as price differential claim.
The government claims that it is paying Rs20 billion in electricity subsidy every month due to the tariff differential, leading to piling up of inter-corporate debt, which stands at around Rs400 billion.
It is also to receive Rs69 billion from consumers on account of fuel price adjustment surcharges, but the issue is in litigation as courts have given stay orders in about 750,000 cases. In order to recover the money, the government is planning to appeal to the Supreme Court to club all these cases to settle them.
For the current fiscal year which started this month, an amount of Rs134 billion has been earmarked for subsidy to power consumers, excluding the Karachi Electric Supply Company (KESC).
“However, if the tariff is frozen, the subsidy will jump to around Rs250 billion for the year,” the water and power ministry official said, but added finance managers were hoping that they would be able to increase the tariff in a caretaker setup.
Updated at: 05 December 2013
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