The Economic Coordination Committee (ECC) of the Cabinet has finalised the tariff rationalisation plan with likely average increase of Rs 1.05 per unit of electricity. The ECC meeting presided over by Finance Minister Asad Umar was submitted a proposal by Power Division on tariff rationalisation. According to the proposal, Nepra provided a new tariff determination for the years 2017-18 (as prior year) and 2018-19 for power sector. The Nepra has proposed an increase of average tariff by Rs 3.82 per unit. This increase reflects a cost of bad and expensive decisions made in the past and inefficiencies persistent in power sector (Rs 396 billion).
Sources said that after taking into account the impact of subsidy, an increase of around Rs 2.10 per unit was needed. However, the ECC decision is yet to be formally announced after its approval from the Cabinet. The sources added that there would be no increase in tariff for domestic consumers using up to 300 units and for small and medium size commercial consumers while tariff for agriculture tube wells has been reduced from Rs 10.35 per unit to Rs 5.35 per unit. Only a minimum increase of 78 paisas per unit for industrial consumers in all categories and a continuation of a subsidy of Rs 3 per unit for the five export-oriented industries, it would be ensured that the cost of electricity does not exceed 7.5 cents per unit. The meeting decided that there would be no increase for schools and hospitals, sources added.
An official of Finance Ministry stated that in the most difficult economic conditions, the tariff proposal has been made to ensure protection of the poor and middle classes. Through the present proposal, agriculture and industry would receive a much needed boost. He said that 70 percent of domestic consumers, 17.6 million, will not be affected from increase in tariff. The ECC appears to have not incorporated 85 paisas net hydel profit share of Punjab and Khyber Pakhtunkhwa in the tariff rationalisation plan for the time being.
The finance minister in the last ECC directed the Power Division to include in its proposal the measures being taken against electricity theft and line losses.
He said that his party has been criticising the previous government for not taking action against line losses and passing on the burden through tariff increase to the honest consumers and now he will not be able to defend the same action by his government.
The minister also directed the concerned officials to submit a detailed plan for improvements in the power sector, especially measures to increase recoveries and reduce losses, before the proposed tariff rationalisation plan could be approved.