Power consumption boost: ‘Winter package’ in limbo as conflicting claims about IMF assent emerge

ISLAMABAD: The federal government’s proposed ‘Winter Package 2024’ to enhance electricity consumption in winter months still hangs in the balance as conflicting claims are being made about its concurrence with the International Monetary Fund (IMF).

Background interaction with officials indicates that the government wants to slash electricity tariff by Rs 7-8 per unit for all categories of consumers across the country for five months i.e. from December 1, 2024 to April 30, 2025.

The government’s intent is to increase domestic demand to reduce capacity charges given that there has been a massive decrease in demand i.e. 10-12 per cent in industrial sector with 8 per cent average decline due to higher electricity tariffs as well as shifting of industry, commercial and domestic consumers from grid to net metering or off-grid.

Move aimed at raising power consumption: PD giving final touches to ‘winter package’

The sources said the government’s team comprising officials of Power Division/CPPA-G and Finance Division held an online meeting with the IMF and requested approval for the Winter Package during which the IMF’s officials raised different questions about projected rise in consumption, its impact on economy and revenue. They also sought some additional data which has been shared through the Ministry of Finance.

One of the officials claimed that IMF has given its approval to the Winter Package for three months i.e. December 1, 2024 to February 28, 2025 but the government is requesting and extension for a further two more months, ie, March and April.

However, another official told this scribe that discussions with IMF are on a three-month Winter Package. According to sources, Power Division’s top brass is in contact with the Finance Division officiating talks with the Fundon the proposed package.

A third source told BR that in recent discussions on the Winter Package, the government has decided to exclude residential users. The plan includes a potential reduction in subsidies for households to offset the cost of the industrial package.

The winter package is designed exclusively for industrial users, with a proposed fixed single-slab rate of Rs. 20-25 per unit plus applicable taxes, applicable to all, including KE.

However, the Ministry of Finance is holding back on giving its approval until a positive response is received from the IMF. The Prime Minister is urging the ministry to secure this approval, aiming to boost industrial operations to their full capacity.

“If the Ministry of Finance and the IMF consent, the proposal is set to be implemented for three months, spanning December 2024 to February 2025. Before receiving federal cabinet approval, the proposal will be submitted to Nepra,” he added.

Power consumption declines within the range of 8,000 MW to 10,000 MW in winter from 28,000 MW in summer months due to reduction in demand as a consequence of higher tariffs and now installation of solar system of about 7,000-8,000 MW across the country that is presenting yet another major challenge for the Discos and K-Electric.

Central Power Purchasing Agency-Guaranteed (CPPA-G) is giving final touches to the winter package in the light of data received from power Distribution Companies (Discos). The key question which is under debate is who will bear the brunt of subsidy of proposed package as Finance Division has already made it clear that subsidy out of what has been budgeted is out of the question as per the understanding with the Fund, the sources continued.

A committee headed by Minister for Petroleum, Musadik Malik is also working on increase in electricity consumption through space heating as gas will be available only three times a day, ie, breakfast, lunch and dinner, for domestic consumers.

Last year, the caretaker the government prepared a tariff reduction package and sought IMF’s approval but the proposal was turned down by the Fund with the rationale that cross-subsidy from non-residential to residential consumers reflects how Pakistan currently manages the impact of electricity tariffs on vulnerable households.

Copyright Business Recorder, 2024