With Nepra’s decision to impose Rs1.25/unit in lieu of periodic adjustment for 3QFY23 to be collected in 1QFY24 – the collective periodic adjustments for 9MFY23 reaches Rs106 billion or Rs1.5/unit on average. This comes at the back of significant upward revision carried out last year in the name of tariff rationalization, where base tariffs were revised upwards in a phased manner, largely upon IMF’s directives.
Another Rs97 billion of upward adjustment has also been carried out under monthly Fuel Charges Adjustment in the first 11 months of FY23. There is also a small matter of additional Rs75 billion slapped as “surcharge” recovered in just one quarter from March to June 2023 – as the previous surcharge of Rs0.43 per unit was deemed too little to cover for the markup payments on the PHPL loans. A similar amount is scheduled to be collected in FY24, thankfully spread over 12 months.
For Karachi consumers though, it gets tougher – the total surcharge from July 2023 onwards is Rs3.23/unit for all non-protected consumers above 300-unit slab – and at the same rate even for consumers in the non-protected category of 0-200 units from November onwards. It is another matter how the national statistics bureau has somehow worked electricity price increase at under 10 percent for most of FY23. This is an underrepresentation of massive proportions and must be looked at.
And now you are hearing the authorities considering another base tariff revision to the tune of Rs7/unit. The existing base tariff (after upward revision last year) is worked out at a revenue requirement of Rs2.8 trillion or Rs24.82/unit. Add to that monthly adjustments, quarterly revisions, surcharges, duties, and standard GST – and the consumer end tariff on national average basis works out at Rs36-37/unit. Mind you, this is based on national T&D losses of 11.7 percent, which is optimism of the highest order. If anything, T&D losses tend to go up and collection down when tariffs are increased significantly.
Capacity charges constitute 45 percent of discos’ revenue requirement on existing tariffs, while energy charges make up for 41 percent. With reduced generation and higher than incorporated T&D losses – expect the per unit charges to go higher. While the generation mix on paper looks much improved from yesteryears, inability to procure fuel supply in timely manner keeps disturbing the balance – as evident from an overrun of Rs100 billion in less than a year on account of fuel charges – the reference tariff of which was revised up by nearly 40 percent less than a year ago.
Also recall that the IMF and World Bank backed “Circular Debt Management Plan” had also resulted in a rollout of subsidy rationalization – under which slabs were reintroduced, and previous slab benefits were abolished (which had a bigger impact on real tariffs than the base tariff increase in most cases). But here we are, less than a year apart, mulling another hefty tariff increase. This space has maintained for now over a decade that tariff rationalization alone was never going to solve the mess that the energy sector is, because that is not primarily the crux of the problem. The ones who pay honestly keep paying more and more for inefficiencies in the form of higher duties and surcharges and now more periodic and base tariff revisions. The ones who steal can walk free as the cost of inefficiency is borne by the honest payer. Sounds just like our taxation system.
It was high time a decade ago to fix the sector. Today, the state of affairs is so grim, it almost looks unfixable.
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