Govt set to build power tax from October

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ISLAMABAD: The govt on Tuesday appeared set to extend the electricity tariff it had placed on hold in April as a part of revised Circular Debt Managem­ent Plan (CDMP) and efforts to make sure continuous foreign inflows from lending agencies – particularly the IMF, the planet Bank and therefore the Asian Development Bank.

The tariff increase along side CDMP is predicted to line into motion from Oct 1, but has got to be discussed intimately by the Economic Coordination Comm­ittee (ECC) of the cupboard within a couple of days. The tariff increases would be made through quarterly adjustments and surcharges during a phased manner.

To progress the precise size of tariff increase along side other measures to contain and reduce circular debt, minister of finance Shaukat Tarin, Energy Minister Hammad Azhar, SAPM on Power and Petroleum Tabish Gauhar and secretaries of finance and power besides other senior officials of the 2 divisions had an in depth discussions on Tuesday.

Mr Tarin, Azhar and Gohar didn’t answer involves comments.

“We need a final shape of the CDMP shared with the IMF and therefore the International Bank for Reconstruction and Development by next weekend to possess some kind of understanding within 15 days,” a senior government official told Dawn.

He said it had been important that when minister of finance Shaukat Tarin visits Washington early next month for Oct 11-17 World Bank-IMF annual meetings, the Ministry of Finance and IMF staff are on an equivalent page regarding the revival of $6bn IMF programme currently in recess.

The official said the planet Bank executive board would separately be meeting within the last week of this month to approve three different programme loans, particularly the $400 million energy sector loan. He said various scenarios were discussed including the complete revival of tariff increase plan committed with the IMF and therefore the subsequent challenges arising out of accelerating size of fuel cost adjustments (FCA), partly due to record high LNG prices, on a monthly basis.

“Definitely the consumers are in prosecution within the shape of base tariff increase when FCAs are ranging between Re1 to Rs1.50 per month,” the official conceded, adding the govt has thus far been advocating 18-20pc increase in industrial electricity consumption due to cheaper rates on incremental consumption as a hit story to deal with power surplus challenge but “you need to take a choice at some point”.

After committing about Rs5.65 per unit increase in power tariff with IMF early this year to get about Rs900bn by June 2023, the govt increased tariff by about Rs2 per unit early this year and backtracked from second round of Rs1.40 per unit with effect from April 1. within the heat of such tariff increases, Prime Minister Imran Khan replaced Dr Abdul Hafeez Shaikh with Shaukat Tarin as minister of finance .

The official said the target to get Rs900bn through tariff adjustments till June 2023 remained unchanged as within the original CDMP agreed with the IMF and therefore the International Bank for Reconstruction and Development last year. The schedule and size of adjustments could also be slightly different, he said.

A Finance Ministry statement quoted the minister of finance as telling the team of energy ministry led by Mr Azhar to “adopt forward planning while handling the volatile energy prices in international markets and also emphasised the importance of risk hedging to dampen the impact of recent fluctuations in global prices of petroleum and petroleum products particularly thanks to supply side disruptions amid Covid-19 pandemic”.

The minister of finance “also stressed upon exploring cost-effective options like renewable sources of energy for a sustainable energy equation by reducing reliance on expensive power producing plants so as to form the energy sector dynamic and sustainable”.

The energy minister explained growing demand for energy, installed generation capacity, transmission capability and also outlined steps being taken for improving transmission and distribution systems for reducing costs and ensuring sustainability, the statement said.

Mr Tarin said the govt was cognizant of its obligation to satisfy energy requirements at affordable rates for electricity consumers and was taking all possible measures to satisfy future energy demands.

Under the plan committed with the IMF, the facility sector was to urge a further financial injection of Rs2.650 trillion in two years. This included Rs1.060tr revenue generation through various tariff adjustments and rebasing and by the govt (40pc contribution), followed by Rs850bn worth of governance, efficiency and recovery efforts of the facility Division (32pc) and Rs740bn by the Finance Division (28pc) through realistic allocation and timely payment of subsidies.

Similarly, the facility Division was responsible to place together Rs850bn through 5.73pc improvement in overall recovery of billing (Rs205bn), for 2.12pc reduction in system losses (Rs130bn), reduction in IPPs markup on stock payments (Rs67bn), impact of reduction reciprocally on equity secured from IPPs (Rs146bn) and payment by KE worth Rs303bn including Rs127bn starting with July 2021 and Rs175bn in FY23.

The Power Division had estimated the typical consumer tariff to extend from about Rs16 per unit to Rs20.50 by July 2022.

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