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Thread: 40% power tariff hike passed on to most consumers

  1. #1
    Media Editor Razamustafa76's Avatar
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    May 2013
    Pakistan Saudi Arabia

    40% power tariff hike passed on to most consumers


    The federal government has apparently misled both the Supreme Court and citizens alike by quietly passing on up to a 40% increase in electricity prices to even those domestic consumers who use less than 200 units a month.

    During a hearing of the suo motu case on the power tariff issue, the government had assured the Supreme Court that the hike in electricity prices would not apply to consumers who use up to 200 units a month. Prime Minister Nawaz Sharif had also pledged that the same consumers – who belong to the low income bracket – would be exempt from the increase.

    Power distribution companies, however, have increased the tariff for most consumers regardless of their monthly consumption based on the federal government notification which gave effect to the new prices.

    The notification stated that the 40% increase in prices was to be passed on to all consumers who use smart or ‘Time of Use’ electricity meters, which apply different rates for daytime and nighttime. Power companies have forced most consumers across the country to use Time of Use meters, without making any distinction between their income brackets.

    According to the notification, the new off-peak rate for domestic consumers who use Time of Use meters is Rs12.50 per unit, up from Rs8.90. Similarly, the peak hours electricity rate has been increased to Rs18 per unit from Rs13.99. Consumers who use smart meters but consume less than 200 units a month are charged Rs18 per unit during peak hours, same as consumers who use more than 700 units a month.

    Fresh bills issued by the Islamabad Electric Supply Company (IESCO) for the month of October confirmed consumers were charged according to the new rates, irrespective of the relief granted to consumers who use less than 200 units a month. An electricity consumer in IESCO’s jurisdiction was billed Rs2,182 despite using only 134 units in October. The consumer’s off-peak time consumption was 107 units, for which he paid Rs12.50 per unit.

    When approached, IESCO Superintendent M Altaf said that the exemption from the increase in electricity prices did not apply to consumers using Time of Use meters. He produced the government notification in his defence.

    When contacted by The Express Tribune, a top finance ministry official insisted the premier had not approved any increase in the power tariff for consumers using less than 200 units a month, regardless of whether they used smart meters or not. He said power distribution companies had issued the wrong bills and the mistake would be rectified ‘within 48 hours’.

    However, even after five days, neither the Ministry of Finance nor the Ministry of Water and Power issued any clarification in this regard. Despite repeated attempts, the spokesman for the ministry of water and power Zargham Eshaq Khan was not available for comments.

    The government increased power rates last month under structural reforms agreed with the International Monetary Fund (IMF) for the Extended Fund Facility loan, which amounts to $6.67 billion. At the time, Finance Minister Ishaq Dar had also announced the government would subsidise power rates for consumers who use less than 200 units a month and bear Rs140 billion in subsidies this year.

  2. #2
    Senior Member Fassi's Avatar
    Join Date
    Aug 2013
    Pakistan France

    Power consumers to pay Rs117bn more due to govt’s mismanagement

    LAHORE: Each electricity unit has become costlier by Rs1.30 as the federal government started charging two recently introduced taxes in fresh bills, transferring a cumulative burden of around Rs117 billion to consumers this year.

    The November bills include the Universal Obligation Fund at the rate of Re1 per unit for those falling between 301 and 700 units and 50 paisa for consumers over 700 units.

    Similarly, a debt servicing surcharge of 30 paisa per unit has also been included in the bills. Both the surcharges are over and above 30 paisa per unit monthly fuel adjustment charges for August and another 51 paisa per unit for September.

    Prime Minister Nawaz Sharif had withdrawn the September fuel charges, but they are still part of November bills.

    “The sector sells around 90 billion units every year,” explains a former head of the Central Power Purchase Agency. By raising tax on each unit by Rs1.30, the government has transferred an additional burden of Rs117 billion to consumers – a killing figure by any stretch of imagination.

    Of the two, the debt servicing charge is the most interesting one. When the PML-N government took over, it drew huge political mileage out of clearance of circular debt. Its ministers went about painting it as a testimony to their party’s financial wizardry and claimed that it would have a positive impact on loadshedding.

    But it turned out that out of Rs500bn, roughly 50 per cent was paid in cash to the independent power producers (IPPs) and the rest was parked in the debt holding company which the PPP government had set up in 2010 to clear sectoral books of Rs301bn.

    The company is now holding a debt of over Rs500bn and the new surcharge of Rs0.30 per unit is needed to service it.

    “Originally, the debt accumulated because the tariff was not raised between 2003 and 2008,” said a former Pepco head. The servicing cost during that period had gone up substantially. The government refused to raise tariff and promised to pay the differential as subsidy, but it did not. As a result, the debt shot up to Rs301bn and a new company was formed to shift the burden to it and clear the sector.

    BAD POLITICS: The present government added to the debt roughly the same amount and now wants consumers to service the loans that were accumulated over the past decade. It is bad politics, even worse financial management and a disastrous action socially, he concluded.

    The Universal Obligation Fund of Re1 per unit is even more discriminatory and is tantamount to covering corruption and inefficiency, says a former head of the National Transmission and Dispatch Company. The government wants to keep electricity rates uniformed throughout the country but it is not ready to pay the differential – under pressure from lenders. Thus, it has introduced a new tax. It tried to make it part of tariff through Nepra which refused to budge.

    Thus it has levied a tax to reduce subsidy of equivalent amount; if it sells 92bn units it would earn Rs92bn more and reduce the subsidy by the same margin, to the much satisfaction of international lenders and social and poverty disaster for the Pakistanis, he concluded.

    Published in Dawn, November 30th , 2014

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