ECC approves ‘winter package’: Eligible consumers to pay Rs26.07/kWh tariff

ISLAMABAD: The Economic Coordination Committee (ECC) of the Cabinet on Tuesday approved a three-month winter electricity relief package - calling the subsidy-neutral interim relief initiative, under which, a tariff of Rs26.07/kWh will be charged to all eligible consumers on the respective incremental consumption, above the benchmark consumption in the corresponding months.

The Federal Minister for Finance and Revenue, Senator Muhammad Aurangzeb, chaired a meeting of ECC, here on Tuesday.

The meeting considered a proposal submitted by the Ministry of Energy (Power Division) regarding a winter demand initiative for the industrial, domestic (ToU and non-ToU consumers exceeding 200 units, commercial and general services consumers of discos and K-Electric to enable optimum use of system generation capacity besides reducing gas demand due to shifting of favourabe demand towards electricity.

PM announces power relief ‘winter package’

It was proposed that under the initiative, a tariff of 26.07 Rs/kWh shall be charged to all eligible consumers on the respective incremental consumption, above the benchmark consumption in the corresponding months.

The initiative shall remain applicable for a three-month billing period effective from December 2024 to February 2024. The benchmark consumption will be the higher of either the relevant month’s consumption in fiscal year 2024 or the historical consumption over the past three years for the relevant months, based on a formula and terms and conditions laid before the ECC.

The ECC discussed the proposal and approved it, calling the subsidy-neutral interim relief initiative worked out by the Power Division as being timely and relevant in view of recent surge in electricity tariffs and the reduced demand across various consumer categories.

Earlier this month, Prime Minister Shehbaz Sharif announced a three-month electricity relief package for consumers to encourage electricity use during the low-demand winter season.

The International Monetary Fund (IMF) was taken on aboard before announcing the power relief scheme by Prime Minister Shehbaz Sharif. This was confirmed by Federal Minister for Finance.

The prime minister, while giving detail of the package said domestic consumers would be charged with a flat rate of Rs26.07 per unit, saving Rs11.42 (30 percent) to Rs26 (50 percent) per unit on various tariff slabs. The industrial consumers would be able to save Rs5.72 to Rs15.05 per unit, saving 18 percent to 37 percent, while it would be Rs13.46 to Rs22.71 per unit for commercial users, PM Sharif said.

Official documents revealed that in an effort to manage seasonal electricity demand and drive economic growth, Pakistan’s Power Division is introducing Bijli Sahulat Package for the winter months from December 2024 to February 2025. Recognising that electricity demand in Pakistan peaks during summer and significantly decreases in winter, this initiative aims to encourage higher consumption during the low-demand winter season by offering reduced electricity rates.

Key features of the initiative include; (i) Lower tariffs for incremental demand: A fiat rate of Rs26.07 per und will be offered for any additional electricity demand above the benchmark historical average. This will allow industries commercial, general services and households to save significantly compared to the prevailing tariffs, (ii) Economic growth through industrial incentives: The government is committed to fostering increased industrial and commercial activity as a driver of economic growth. Industries that consume additional electricity, beyond a set benchmark based on their historical consumption, will benefit from a 18 to 37 percent discount on the prevailing tariff rate, (iii) Examples of Cost Savings: For instance an industry currently paying Rs40 per unit for 100,000 units and consuming an additional 2,000 units at Rs26.07 per units would reduce its average cost of electricity to Rs37.21 per unit, achieving an average expense reduction of 7.5 percent, (iv) Encouragement for Capacity Expansion: This initiative encourages industries to increase production capacity while benefiting from lower average electricity costs, making their operations more cost-effective.

Calculation of Historical Consumption: Historical consumption for the past three years with be higher of last year’s consumption, of average weighted consumption on a rolling basis, with weights assigned as follows: @ 50 percent for fiscal year 2024, @ 30 percent for fiscal year 2023 and @20 percent for fiscal year 2022.

Households will also benefit from the discounted rate for additional winter electricity consumption, making it an attractive option for heating and other energy needs that would otherwise rely on gas.

BijliSahulat Package shall be applicable up to only 25 percent units over the reference benchmark consumption. Furthermore, all the incremental sales over and above 25 percent of the benchmark consumption shall be charged normal tariffs as notified by the government.

The ECC also considered a proposal submitted by National Disaster Management Authority (NDMA) for transfer of Rs3.140 billion balances of erstwhile Emergency Relief Cell (ERC) into NDMA Fund to carry out its inland as well as overseas rescue and relief operations in line with the statutory mandate of the authority.

The proposal was discussed and approved with the proviso that since the balances in the ERC were made up of public donations and were granted for the purpose of relief, rescue and rehabilitation of floods and earthquake victims, NDMA would spend these balances for the stated purpose.

The meeting was attended by Minister for Power Sardar Awais Ahmed Khan Leghari, Minister for Planning, Development and Special Initiatives Ahsan Iqbal, Minister for Commerce Jam Kamal Khan (virtual), Economic Affairs Ahad Khan Cheema (virtual), Minister of State for Finance and Revenue Ali Pervaiz Malik, federal secretaries, and senior officers from concerned ministries and departments.

Copyright Business Recorder, 2024