Sources said that subsidy for the current fiscal year would be over Rs 117 billion if the proposed 12 percent increase in power tariff is not made effective. An official said that the government had given Rs 1 trillion subsidy on account of power sector from 2007-08 to-date.

He said that subsidy of Rs 114 billion was given to the power sector in the fiscal year 2007-08 on account of tariff differential and line losses including non recovery of electricity bills by distribution companies, which jumped to Rs 391 billion in 2008-09. However, subsidy to power sector decreased to Rs 147 billion in 2009-10 largely due to increasing power tariff following pressure by the International Monetary Fund (IMF) to minimise the subsides in power sector and to other state owned enterprises (SOEs).

The official said that subsidy to the power sector increased to Rs 346 billion in the last fiscal year because Pakistan was not in the IMF program after May 2010 mainly because of failure to meet some performance benchmarks including those pertaining to the agreed reform process for the energy sector.

Source said that the Cabinet Committee on energy, headed by Finance Minister Dr Abdul Hafeez Sheikh, proposed 12 percent increase in power tariff in the ongoing fiscal year. The inter-ministerial committee worked out Rs 117 billion and requested 12 percent increase in power tariff in the current fiscal year to recover Rs 67 billion and remaining Rs 50 billion would be paid by the government as subsidy. The amount included Rs 24 billion for line losses in addition to 16 percent allowed by National Electric Power Regulatory Authority (Nepra), Rs70 billion on account of non-collected bills and another Rs 24 billion revenue loss on account of fuel adjustment.

The distribution companies are allowed 16 percent transmission losses whereas their actual cumulative transmission losses have been estimated at 19 percent and above and energy committee reportedly requested the government to allow distribution companies full adjustment of lines losses. An official of Water and Power Ministry claimed that tariff differential was minimised to 1.99 per unit from Rs 2.86 per unit by shutting down oil and gas guzzling power generation plants. Average electricity cost per unit, he said, is Rs 9.40 and the government is charging Rs 7.83 from the consumers, reflecting a tariff difference of Rs 1.57 per unit.

The government has worked out Rs 41 billion subsidy for consumers utilising 100 units per month in the current fiscal year, followed by Rs 22 billion to life line consumers using up to 50 units. The subsidy of Rs 6.12 billion is to be extended to those consuming 101 to 300 units.