The federal government is likely to extend Rs 1 billion subsidy to Karachi Electric Supply Corporation (KESC) for keeping the power tariff at the present level, official sources told Business Recorder.
"We have recommended to the Economic Co-ordination Committee (ECC) of the Cabinet that a subsidy of one billion rupees should be given to KESC on account of two quarterly tariff determinations," they said.
The National Electric Power Regulatory Authority (Nepra) had allowed KESC to increase tariff by 38 paisa per unit across the board, except lifeline consumers, for two quarters (September-December and January-March), due to variation in fuel price and cost of power purchase from Wapda and IPPs.
Sources said that the tariff determined for both quarters would be notified in the official gazette, but it would not be passed on to the consumers.
In the previous determination, Nepra had worked out Rs 2157 million or 22.68 paisa per unit impact in the shape of fuel price variation and Rs 426 million or 4.48 paisa per unit as power purchase difference. The effect of both factors was calculated at 27.16 paisa per unit with previous adjustment of 17.93 and 8.53 paisa per unit for fuel price variation and power purchase, respectively, but Nepra allowed only 23 paisa raise per unit.
In the recent tariff determination, the regulator says that according to the prescribed mechanism, the maximum adjustment which can be allowed in a quarter due to variation in fuel price and variation in power purchase is 2.5 and 1.5 percent of average sale rate, respectively.
KESC had a cumulative leftover balance at the end of December 2005 as Rs 1146 million on account of variation in fuel price and Rs 520 million for variation in power purchased from other sources.
After accounting the leftover balance, the increase in average sale rate of KESC on account of variation in fuel price came to 45.27 paisa per unit and 0.31 paisa per unit for purchase of power. The regulator calculated 14.95 paisa per unit on both accounts for January-March quarter and allowed the utility to raise tariff 15 paisa per unit.
However, KESC has been conveyed that the spillover left on account of variation fuel price, to be adjusted in the next quarter, amounts to Rs 3 billion.
Sources said that Finance Ministry had also agreed with the proposal that subsidy should be extended to the utility to freeze the tariff at the present level, and added that the issue would be considered by the ECC in its next meeting for which date has not been fixed yet.