The Prime Minister’s relief package, which was announced on February 28 by the premier in a public address amid opposition's apparent pressure, of Rs5per unit cut in electricity price of up to 700 units would involve a subsidy of Rs115 billion on account of tariff and worth Rs21.47 billion on account of fuel impact for the next four months.

Sources in the Finance Ministry on condition of anonymity said that as per working done by the relevant ministries reduction in electricity tariff by Rs5 per unit for both (domestic and commercial consumers) would involve Rs16.20 billion financial implication for DICSOs for the month of March 2022 and Rs2.91 billion for K-Electric, while fuel impact for DISCOs is projected at Rs10.22 billion and Rs0.08 billion for KE during the month under review.

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Sources further stated that for the month of April 2022, an impact of Rs21.75 billion is estimated on account of a reduction in tariff for DISCOs and Rs3.74 billion KE, while fuel impact is projected at Rs6.27 billion for DISCOs. Fuel impact for the four months has been worked out on the assumption of $95/barrel.

For the month of May 2022, the financial impact of tariff reduction for DISCOs is worked out at Rs28.51 billion and KE Rs4.42 billion besides, fuel impact for DISCOs Rs1.05 billion and KE Rs0.67 billion.

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While for the month of June 2022, subsidy for DISCOs on account of tariff decrease is projected at Rs32.49 billion and Rs4.55 billion for KE. While fuel impact is worked out at Rs3.18 billion for both the consumers of DISCOs and nil for KE, the sources added.

The sources said that the electricity package has been worked out on the assumptions that coal prices would remain at $232/MT during the remaining four months of the outgoing fiscal year, while RLNG prices at $15 MMBTU for the month of March 2022 followed by $17 MMBTU for April, $16 MMBTU for May and $15 MMBTU in June 2022.

A subsidy gap is also estimated on account of FCA for DISCO at Rs2.86/kWh for the month of March, Rs190/kWh for the month of April, Rs0.26/kWh for the month of May, and Rs0.55 for the month of June 2022.

The story was originally published in Business Recorder on March 13, 2022.