Power subsidy rationalisation plan unveiled

ISLAMABAD: The government Monday unveiled a three-phased power subsidy rationalisation plan aimed at trimming down the number of beneficiaries of non Time of Use (ToU) domestic consumers across the country, including KE, and increase tariff of consumers using over 200 units in a month through new slabs.

The plan came under discussion at a public hearing at National Electric Power Regulatory Authority. Chairman Nepra, Tauseef H. Farooqi, Member Sindh, Rafique Ahmad Shaikh, Member Balochistan, Rehmatullah Baloch and Member KP, Engineer Masood Anwar Khan conducted the hearing.

Chief Executive Officer (CEO)/Additional Secretary(Power Division), Waseem Mukhtar, Joint Secretary, Mehfooz Bhatti, Naveed and Mateen Bukhari represented Power Division.

Nepra framed the two following questions: (i) what is the financial impact of the policy guidelines on different category of consumers as well as on Discos? and (ii) whether the proposed guidelines shall be applied retrospectively or prospectively?

During the hearing, Power Division presented its three-phased tariff subsidy rationalisation plan, which the Authority observed needs clarifications especially with respect to average of six month consumption, move to next slab and one slab benefit. CPPA-G wants immediate implementation of the subsidy phasing out plan, without waiting for determinations of Discos for FY 2021-22.

Power Division argued that subsidy should be based on socio economic status of consumers. Currently 24.5 million (99 per cent) domestic consumers are getting subsidy benefit. System protects consumption (84 per cent) below 300 units representing 89 per cent domestic consumption (22 million).

Power Division has submitted the following plan: (i) expanded definition of the lifeline consumers to include residential Non-ToU consumers with a maximum of last twelve months and current month’s consumption of 100 units; (ii) two rates for 50 and 100 units will continue; (iii) create a new category of protected customers (those consuming 200 kWh per month consistently for the past 6 months); (iv) break the 301-700 slab into four slabs – 301-400, 401-500, 501-600 & 601-700 with the same marginal tariff; (v) each of these slabs would continue to get the previous slab benefit of 300 kWh slab as today; (vi) such adjustment be reflected by way of modification in SRO Nos. 374(1)/2018 to 383(1)/2018 of March 22, 2018 as modified by SRO Nos. 01 to 10 of 2019 of January 01, 2019 and SRO Nos. 182(1)/2021 to 191(1)/2021 of February 12, 2021.

According to the Power Division, in the long term, the subsidies to the vulnerable groups will be delivered in cash, based on identification through Ehsaas program.

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The plan which has already been approved by the Cabinet stipulates that the subsidy can be delivered based on electricity consumption and only to consumption categories (slabs) identified as vulnerable based on evidence (HIES). Analysis of HIES 2018-19 reveals that around 92 of the bottom two income quintiles (40 per cent, 10 million households) consume less than 200 kWh per month.

The increase in monthly FCA will be passed on to those consumers who will use over 201 units on average whereas impact of positive FCA of other consumer categories will also be increased with new definition of lifeline consumers.

Second phase, which is at conceptual stage envisages the following: (ii) gradual reduction in total net subsidy for unprotected residential consumers; (ii) reduction in cross-subsidy; (iii) removal of previous slab benefit; (iv) dividing agriculture tube-wells slab into two categories; and (v) reforming subsidies to QESCO tube-wells by subsidizing solarization/modernization of tube-wells.

Third phase envisages: (i) reducing number of slabs for residential consumers among; (ii) protected (subsidized directly by Annual Budget); (iii) unprotected (below cost recovery cross-subsidized by high users); (iv) unprotected at cost recovery; (iv) unprotected above cost recovery to cross-subsidize low users; (iv) adjusting tariffs of industrial, commercial and agriculture slabs to have zero net subsidies; and (v) de-linking Fata and AJK subsidies from electricity tariffs.

During the hearing the Authority raised the issue of meter reading date, which Discos can maneuver to deprive the consumers from the subsidy benefit. CPPA-G officials had no answer to this question. The official present at the hearing said that it is an administrative issue of Discos.

Chairman Nepra argued that the Power Division should bring a complete three phased subsidy rationalisation plan so that a clear picture may be presented. Member Sindh sought testimony from Power Division that the approval of first phase will be clubbed with the other two phases without taking the regulator on board.

The Authority also urged Power Division to use its own data of consumers instead of taking the figures of PBS for this purpose. “We have to make electricity bills simple instead of making the nation express reservations on billing,” Chairman Nepra added.

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He acknowledged that he was not satisfied with the performance of Discos and Nepra has already mentioned this in State of Industry Report adding that the Power Division had brought slabs in the first phase and will bring tariffs in the next phase and then people will start their protests.

Mehfooz Bhatti, joint Secretary (Power Finance) said that the entire plan will be implemented in five years.

Some interveners proposed that calculation of average billing of consumers who use 200 units monthly should be expanded to one year instead of six months. The representative of industry, Arif Bilwani and Zubair Motiwala proposed that industry should not be further burdened through cross subsidization.

KE’s representative wanted an assurance from the government that subsidy rationalisation plan will not have any impact on its revenue.

A representative of Pakistan Engineering Council (PEC) proposed that the government focuses on renewable energy instead of imported fossil fuels. Some interveners opposed subsidy rationalisation plan, maintaining that it would further burden the vulnerable segment of society.

Nepra will announce its determination, after in house discussion and clarifications from the Power Division.

Copyright Business Recorder, 2021