Seven percent raise in power tariff likely from October 1

The government is likely to increase power tariff by 7 percent from October 1, 2009 as agreed with the International Monetary Fund (IMF), the World Bank and the Asian Development Bank (ADB), after formal approval of Prime Minister Yousuf Raza Gilani. On July 15, 2009, Pakistan had reached an initial agreement with the World Bank and the Asian Development Bank to raise power tariff by 22-26 percent in three phases.
The government had initially committed to eliminate subsidies by the end of June 2009. However, it was later agreed that subsidies would be entirely eliminated by April 2010. Sources said Pakistan agreed to raise power tariff up to 7 percent on October 1, 10 percent on January 1, and 5 percent from April 1, 2010. There are reports that the Finance Ministry has dispatched a summary to the Prime Minister seeking his consent for raise in power tariff. However, a senior official of the Finance Ministry did not confirm these reports.
"We have not sent any summary to the Prime Minister; check it from the Ministry of Water and Power," he said. In reply to a question, he, however, confirmed that tariff adjustment "is due in accordance with the commitments" with the international financial institutions.
Finance Minister Shaukat Tarin, at a recent meeting of the Economic Co-ordination Committee (ECC) of the Cabinet, had stated that the government was bound to honour its commitments with the International Monetary Fund (IMF) regarding increase in tariff. Pakistan has to increase power tariff up to 28 percent till June 2010, in addition to 6 percent raise due to upcoming rental power plants (RPPs).
Under the agreement reached between GoP and the financial institutions, volume of subsidy would be kept at Rs 55 billion during the current financial year, sources said. The International Monetary Fund (IMF) has reportedly agreed to Rs 55 billion subsidy to consumers.
Sources said the government would provide 100 mmcfd gas for power generation to reduce consumption of furnace oil and to produce cheaper electricity to minimise the impact of power tariff on consumers. It was further agreed that the saving of Rs 12 billion on account of additional gas to be pumped into the power system would be used for the benefit of the consumers.