National Electric Power Regulatory Authority (Nepra) is to formulate a mechanism to cross subsidize Rs 3 per unit subsidy beyond June 30, 2017 extended to the industrial sector across Pakistan under Industrial Support Package (ISP), well informed sources told Business Recorder
Giving the background sources said that Prime Minister Nawaz Sharif announced a reduction of Rs 3 kWh in the electricity tariff for industrial consumers during 39th annual export awards distribution ceremony organized by the Federation of Pakistan Chambers of Commerce and Industry (FPCCI) at Karachi. Ministry of Water and Power, in its summary of January 27, 2016 approached the ECC for implementation of Prime Minister's directive.
ECC of the Cabinet, in its decision of January 28, 2016 approved reduction of the existing base tariff for all industrial consumers of all Discos by Rs 3/kWh for the financial year 2015-16 for electricity consumed from January 1, 2016 and directed the Ministry of Water and Power to issue policy guidelines to Nepra not to pass on negative fuel price adjustment to industrial consumers till the tariff determination/notification of all X-Wapda Discos .
Ministry of Water and Power further stated that ECC's decision besides SRO No.395 (1)/2016 of May 3, 2016 was forwarded to all stakeholders for implementation. However, subsequently, Ministry of Finance had raised the following observations for clarification before further processing of the subsidy claims: (i) K-Electric is included in the SRO 395(1)/2016 while the ECC of the Cabinet decision does not mention this entity; and (ii) as per ECC's decision, the subsidy is payable from January 2016 to June 2016 with the condition that the benefit of reduction in Fuel Price Adjustment (FPA) will not be passed on to the industrial sector.
Later, Ministry of Finance again requested for following rectification: (i) ECC's decision of January 28, 2016 may be rectified to include KE so that the record is regularized; and (ii) as per ECC's decision, the subsidy is payable from January 2016 to June 2016, therefore, S.R.O 395(1)2016 may be amended to include the exact period.
In order to clarify the issues raised by Ministry of Finance and prompt processing of the pending subsidy claims under this head, the ECC of the Cabinet was requested to approve the following proposals: (i) a Rs 3/kWh reduction on the existing base tariff for the industrial consumers may also be allowed to KE industrial consumes in pursuance of ECC of August 28, 2008 whereby it was decided to treat KE at par with the other Discos; and (ii) the subsidy on account of industrial package may be allowed to industrial consumers till new tariff determination/notification of all Discos is issued by the Ministry of Water and Power. Further, Nepra may not pass on negative fuel price adjustment to the industrial consumers. However, after notification of new tariff determination, the subsidy will be addressed as per ECC of the Cabinet decision.
The ECC of the Cabinet in its decision of November 10, 2016 had approved proposals for inclusion of KE industrial consumers in Prime Minister's support package and extending the package in time till the new determined tariff is notified, with a condition that subsidy would be cross-subsidized. Ministry of Water & Power had requested to modify ECC's decision to the extent of the following: (i) the support package was cross subsidized against negative fuel price adjustment across all Discos. However, the ISP could not be cross subsidized against the base tariff as the matter is still sub judice. The payment of ISP claims after cross subsidizing against negative fuel price adjustment may be made till June 2017 claims; (ii) a mechanism in the form of policy directive to Nepra for inclusion in base tariff for the purpose of cross subsidy will be worked out for the ISP beyond claims of June 2017 subject to amendments in Nepra Act in the Parliament; and (iii) retrospective recovery of ISP claims may be made, under proposed mechanism for payment, if any adjusted in tariff and subsequent claims of subsidy.
The ECC in one of its recent meetings approved the proposal with the modification that a mechanism in the form of policy directive to Nepra for inclusion in base tariff for the purpose of cross subsidy will be worked out for the ISP beyond claims of June 2017 and retrospective recovery of ISP claims may be made, in accordance with the mechanism for payment, if any, adjusted in tariff and subsequent claims of subsidy through the same policy directive.