Bid to raise subsidy for protected power users: Further cut in FY25 PSDP likely

ISLAMABAD: The government is likely to further cut the Public Sector Development Programme (PSDP) 2024-25 to increase subsidy for the protected categories of domestic consumers for a couple of months due to massive overbilling across the country, well-informed sources told Business Recorder.

This will be another cut in the PSDP 2024-25 after the Rs250 billion cut in the total PSDP of Rs1.4 trillion meant to create fiscal space to give relief to the most affected people without compromising the deal with the International Monetary Fund (IMF).

The sources said the Power Division is expected to get approval of the Federal Cabinet to alter the already approved Schedule of Tariffs (SoTs). However, it is unclear, how much extra subsidy the government intends to allocate for the protected consumers for three months.

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The prime minister has also removed Additional Secretary Power Division Zafar Abbas, an officer of BS-21 of Secretariat Group, who was dealing with key affairs of the Power Division.

The National Electric Power Regulatory Authority (NEPRA) was scheduled to hold a public hearing on July 8, 2024, on the “motion filed by the Federal Government with respect to recommendation of consumer end tariff for Discos and K-Electric under section 7 and 31 of the NEPRA Act 1997 read with Rule 17 of the NEPRA tariff (Standards and Procedure Rule, 1998” but it was rescheduled on Sunday for two days till July 12, 2024, after instructions from Power Division.

“The federal government wants to alter the already approved SoTs with more subsidy for the protected category of domestic consumers using 1-200 units per month through a further cut in PSDP after taking the IMF on board,” the sources added.

The Federal Investigation Agency (FIA) is also investigating the complaints of overbilling due to which protected category of consumers is also suffered. The woes of affected consumers are being shared by the electric media. This has made the power corridors disturbed. The prime minister has also held a number of meetings on the issue of overbilling.

Insiders claim that Discos usually send exorbitant bills twice a year on the instructions of CPPA-G/Power Division to meet revenue targets. Discos choose those categories of consumers for exorbitant bills who do not have access to the Discos offices. However, this time social media and electric media brought the woes of affected consumers to the notice of government and public. Meanwhile, agencies have also sent their reports to the government that political parties can further flame the situation.

Previously, the Power Division made changes in the determined base tariff and shifted more financial burden on the middle category of domestic consumers (ranging from 200-400 units) as cross-subsidy has been reduced to a minimum level on the demand of the textile sector. The government intends to raise over Rs550 billion from the power sector during 2024-25. In addition, the government will also recover huge amount from power consumers through different levies which constitute about 40 per cent of the total bill.

On July 2, 2024, Prime Minister Shehbaz Sharif accorded approval of the revised SoT in the light of talks with IMF, whereas, on July 3, 2024, the Federal Cabinet approved the summary through circulation.

The Power Division has informed the prime minister that currently, the national average uniform applicable base rate on the revised sale mix is Rs28.44/unit which would be increased to Rs32.99 per unit after a net average increase of Rs4.55 per unit including rebasing and tariff rationalisation.

“If the rebasing is applied with effect from July 1, 2024, the amount of tariff differential subsidy is expected to be around Rs266 billion. No increase has been proposed for the domestic non-ToU lifeline consumers whereas the rate for industrial consumers has been maintained at the last year level in an effort to reduce the cross-subsidy burden. Similarly, the tariff for AJ&K has also been reduced to arrive at the cost of service,” the sources quoted the Power Division as claiming in its summary to the prime minister.

In its determinations, the NEPRA has increased the fixed charges from Rs200-500/kW/month to Rs500-2,000/kW/month in order to align the sector’s cost and recovery structures. However, after considering frequent representations made by the consumers regarding heavy increase (up to 400 per cent) in fixed charges, Power Division has recommended that the fixed charges may be increased to Rs400-1,250/kW/M only in the instant determination and the variable rates may be adjusted accordingly.

Further, the consumers having low utilization in certain months are impacted significantly by applying fixed charges at the rate of 50 per cent of the sanctioned load. It is also recommended to revise the application of fixed charges at the rate of 25 per cent of the sanctioned load.

Copyright Business Recorder, 2024