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

ISLAMABAD: Power Division is said to be giving final touches to the ‘Winter Package 2024’ to increase electricity consumption in winter months especially in industry and space heating, which is unlikely to be cleared by the International Monetary Fund (IMF), well-informed sources told Business Recorder.

Power Division, which is in a state of shock on massive installation of PV solar panels by the industry, commercial sectors and domestic consumers, maintains that if consumption is not increased in winter through a special package, capacity payments will further increase, the sources added.

Power consumption is reduced within the range of 8000 MW to 10,000 MW in winter from 28,000 MW in summer months due to massive reduction in demand and now installation of solar system of about 7000-8000 MW across the country is presenting yet another major challenge for the Discos and K-Electric.

Rebasing of electricity tariffs likely from Jan 1

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 i.e. breakfast, lunch and dinner, for domestic consumers.

The sources said, it is possible that the three joint proposals i.e. winter package, space heating and some tax on solar consumers are presented to the ECC or Cabinet, subject to IMF’s nod, adding that IMF has already been approached for its approval.

According to the estimates, if the winter package gets IMF’s approval it will increase consumption upto 3000 MW in winter as a major share of electricity will be consumed by industry and space hearting especially in off peak hours.

Power Division informed Prime Minister Office in August that considering sensitivity due to the recent tariff hike, the matter will be taken up at the appropriate time, without mentioning any exact date.

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.

The Fund argued that until an alternative is carefully developed, the reduction of this cross-subsidy effectively reduces support to the most vulnerable (just as a reduction in the BISP stipend would).

“As we would not support a reduction in the BISP stipend, we cannot support any such change in this case. Moreover, we would expect the significant additional burden on domestic consumers to heavily impact recovery rates, ultimately necessitating larger tariff adjustments,” the sources quoted IMF as saying previously.

Fund is of the considered opinion that Pakistan’s high electricity tariffs reflect the high cost of its electricity sector, adding that reducing these costs (which are higher than competitors) through renegotiation with IPPs on pacts, ending captive power, addressing theft and line losses, and privatising DISCOs should be a key priority, and is the only sustainable means towards lower tariffs. IMF’s reaction on the new proposal is yet to be received.

Copyright Business Recorder, 2024