Additional electricity consumption: Govt decides to fix industrial tariff at Rs8/unit

ISLAMABAD: The federal government has reportedly decided to fix industrial tariff at Rs 8 per unit on additional electricity consumption over and above existing consumption for three years, sources close to Prime Minister's Special Assistant on Power told Business Recorder.

A meeting was held under the chairmanship of the prime minister on Oct 21, on industrial support package wherein the decision was taken as continuation of its Covid-19 economic relief and stimulus package announced earlier, and in order to spur Small and Medium Enterprises (SMEs) and industrial growth and employment generation.

The meeting approved a proposal for sale of electricity to all industrial connections (B1, B2, B3 and B4) at Rs 8 per unit on additional consumption for the next three years.

Power Division has been directed to move a summary seeking formal approval from the Cabinet.

The current industrial tariff for the four categories ranges from Rs 17.34 per unit to Rs 20.40 per unit in peak and off-peak hours which implies that the fixation of tariff at Rs 8 per unit on additional consumption will be more than taxes and surcharges and fees are over and above this tariff. The industrial sector's monthly consumption is seven per cent of total consumption i.e. seven billion units per annum.

If the industry uses 10 percent extra over and above existing consumption, the impact of extra consumption would be in billions of rupees. For this scheme, Finance Ministry has to seek IMF’s nod.

"If industrial productivity increases in the coming months, further tariff reduction will be looked into to further incentivize industry including SMEs," the sources quoted the meeting's participants as saying. Power Division has been given the deadline of October 27, 2020 (tomorrow) for implementation on the decision.

According to sources, the meeting also decided that subsidy expected on industrial support package shall be paid by the Finance Division on actual monthly cost. Both Finance Division and Power Division have been directed to finalize the settlement mechanism.

Earlier, the government had planned to fix industrial tariff at Rs 13 per unit through reduction of Rs 6 per unit, aimed at consuming surplus power in winter justified on the grounds that as the government is already paying fixed cost to the generators as capacity payment as per contracts, and if the variable cost is recovered from industry through reduction in tariff, it would have nil financial implication on the system.

The idea was to utilize the idle power in winter months. This plan would create jobs and fuel production in the country.

In another important decision, the meeting decided to do away with current system of peak and off peak tariffs considering surplus power available.

Petroleum Division and Power Division have taken a week to carryout a survey of industrial units being provided gas for power generation and ascertain how many of them have electricity connections and can be provided power from the grid. Thereafter as a policy cheap gas for power generation to industrial units may be discussed. This would also help fill the gap of perpetual gas shortage.

Last year, the government extended industrial support package of Rs 3 per unit during off peak hours which was discontinued from July 1, 2019.

Last week, presiding over another meeting, the prime minister informed that he would be giving good news to industry regarding power tariff.

The meeting was attended by federal ministers Hammad Azhar, Asad Umar, Umar Ayub, Trade Adviser Abdul Razak Dawood, Dr. Ishrat Hussain, Governor Sindh, Chairman FBR and other senior officials.

Wajid Bukhari, who represented the steel industry as secretary general of Pakistan Association of Large Steel Producers, informed the meeting that steel is the mother of all industries and is the back-bone of our economy with potential of expansion and more investment in the country. For this the industry needs support from the government through ease of doing business, reduction in the cost of inputs like raw material, electricity, as well as gas and also by providing a level playing field.

Copyright Business Recorder, 2020