Nepra considers tariff hike as govt increases power sector subsidy for FY24
Business
Devaluation, higher interest rate main reasons rebasing price for consumers
ISLAMABAD (Web Desk) – Amid the fears of further devaluation and the power distribution companies’ demand of increased revenues, the National Electric Power Regulatory Authority (NEPRA) is considering a proposal, sources say, to hike the electricity tariff with effect from July 1.
However, this increase may not be transferred to the consumers if the government decides to extend and expand subsidy as a realistic projection of future tariff enables the government to budget the subsidy requirements.
That’s why the amount allocated for power sector subsidy has been increased by 27 per cent to Rs579.075 billion in the 2023-24 budget against Rs455bn in 2022-23.
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The proposed electricity hike is based upon rebasing the per unit rate by up to Rs5 at a time when the Power Purchase Price (PPP) payments are expected to reach over Rs3 trillion during the next fiscal year, sources said.
And this additional burden on consumers is again a direct product of devaluation – a trend fully advocated and stressed upon by the International Monetary Fund (IMF) – with the inflation already reaching a record-high level.
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This proposal is based upon an assumption that the US dollar exchange rate will jump to Rs382 during the last quarter of next fiscal year 2023-24 against the Rs180 or Rs190 assumed for 2022-23. And increased revenue demand – Rs600 billion – made by the power distribution companies (Discos) for 2023-24 is the other factor.
Devaluation – along with less recovery by Discos) and line losses – has also propelled Pakistan’s circular debt to Rs2.5 trillion due to massive devaluation of Pak Rupee. It is estimated that the circular debt is growing by Rs500 per year after the PTI assumed power in 2018.
The thinking behind this proposal is that the Power Purchase Price has to be revised regularly while keeping in view different elements that affect the prices, which besides devaluation also include addition in power generation capacity, change in fuel prices, variation in interest rates and CPI (Consumer Price Index).
So the IMF’s demand to go for higher key policy rate [interest rate] – along with devaluation – is putting additional burden on the masses, if subsidy not provided, or on the national exchequer, if the tariff is subisdised, at time when the world’s top lender is claiming that its focus is on broadening the tax base [direct taxation] and enhance revenue.
