The federal government is all set to increase electricity base tariff for domestic consumers using 201-400 units per month by Rs3.11 per unit through withdrawal of a portion of subsidy as per understanding with International Monetary Fund (IMF).

This was revealed at a public hearing on the second phase of subsidy rationalization plan, organized by National Electric Power Regulatory Authority (Nepra). Chairman Nepra Tauseef H Farooqi, Member Sindh Rafique Ahmad Shaikh, Member Balochistan, Rehmatullah Baloch and Member KP Engineer Maqsood Anwar Khan officiated the hearing.

During the proceedings, it was disclosed that proposed tariff of consumers using 201-400 units per month will reach Rs15.73 per unit from Rs12.62 per unit, a raise of Rs3.11 per unit due to elimination of one slab benefit. The plan has already been approved by the Federal Cabinet.

Power Division team led by Joint Secretary (Power Finance), Mehfooz Bhatti submitted the following proposals to the Authority: (i) removal of one slab benefit (previous slab benefit) and incorporation of revised subsidy through modification in the Discos/ uniform Schedule of Tariff (SoT) as determined by Nepra and notified by GoP including the SoT current in field; and (ii) Federal Government intends to implement adjusted tariff with effect from February 1, 2022.

Chairman Nepra acknowledged that with implementation of the second phase of subsidy rationalization plan, domestic consumers tariff will increase.

“Reduction in subsidy is the government’s prerogative, and Nepra has nothing to do with this. But how can a consumer whose electricity bill will increase with a reduction in subsidy declares it a good move,” said Chairman Nepra, who has faced criticism for allegedly speaking as a spokesperson of the government instead of head of the regulatory body.

Member Sindh lamented that tariff for unprotected consumers is being increased through withdrawal of subsidy. However, CPPA-G’s representative contended that tariff increase is the prerogative of the regulator, adding that tariff of consumers using up to 300 units is Rs18.05 per unit, including QTA.

The tariff for protected consumers, using up to 50 units was Rs3.95 per unit, 100 units, Rs7.74 per unit and 101-200 units, Rs10.06 per unit. However, now the tariff would be 9.50 per unit for 1-100 units, for 101-200 units it will be Rs10.36 per unit, 201-300 units will pay Rs12.62 per unit, 301-400 will be charged Rs15.73 per unit, 401-500 will pat the rate of Rs17.19 per unit, 501-600 will pay Rs18.11 per unit, 601-700 will pay Rs18.75 per unit and 700+ will be charged Rs22.22 per unit.

The average increase in base tariff of domestic consumers will be from Rs0.08 per unit, Rs0.18 per unit, Rs0.48 per unit and Rs0.95 per unit, respectively.

The government will withdraw subsidy of Rs20 billion, of which Rs11.90 billion will be from consumers using 201-400 units.

Power Division claimed that presently, the government is extending subsidy of Rs197 billion, of which Rs20 billion is being reduced.

The government is also giving subsidy of Rs71 billion to protected categories of consumers, which is not being touched so far, and the government will continue to provide subsidy of Rs254 billion to domestic consumers. The subsidy for agriculture, and cross subsidy are not being touched for the time being.

The number of Discos domestic consumers is 27 million of which number of protected consumers including lifeline consumers is 9.9 million excluding KE as of December 2021. The number of unprotected category consumers using 300 units is 16.8 million whereas other consumers using 301-700 units are 632,000. The number of ToU consumers is 418,000.

The amount of subsidy for protected consumers is Rs8.20 per unit which comes to Rs7 1million; whereas 16 million consumers are getting Rs6.14 per unit and their estimated subsidy will be Rs188 billion for the whole year.

Arif Bilwani, a businessman from Karachi raised different questions on performance of power sector and cross subsidy, arguing that overall electricity bills of commercial consumers are Rs45 per unit which is too much. At this Chairman Nepra replied that he has taken up the issue of taxes in bills with Finance Minister Shaukat Tarin who has promised to find a way out to deal with this issue.

Tanveer Barry, Chairman Public Sector Utilities Power and Gas Sub-committee said that the KCCI rejects any reduction in total net subsidy for residential consumers.

He said that in 2021 power base tariff had been increased and Karachi consumers are already facing heavy fuel adjustment charges and quarterly adjustments. Karachi consumers paid Rs0.75 in September 21 and in October Rs1.0751 fuel adjustment charges and quarterly adjustments for the months from July to September is expected between Rs4 to Rs5.

Those consumers who are consuming 301-700 units will bear 95 paisa per unit and those who use below 700 units per month are middle and lower-class people. People are already facing inflation and reports indicate that in 2022 the next phase of the increase in base tariff will come into effect and there will be more reduction in subsidy.

Why does not the Ministry of Energy announce the raise in one go, he questioned, adding that all the benefits of consumers are in court including wheeling charges, claw-back mechanism, and others, so consumers are not getting any benefit.

This report was first published in Business Recorder on Jan 25, 2022.