More burden on people suffering from inflation, base electricity tariff increased to Rs.4.96/unit

a symbolic image.  Reuters/File
a symbolic image. Reuters/File
  • This step has been taken on the demand of IMF.
  • The government will collect Rs 3.281 trillion.
  • The government is also working on increasing the gas rates.

Islamabad: The National Electric Power Regulatory Authority (Nepra) on Friday announced a significant increase in electricity base tariff by Rs 4.96 per unit for FY24 on the demand of the International Monetary Fund (IMF).

After this move, the government will collect Rs 3.281 trillion from electricity consumers of all distribution companies.

Besides this, the government is also working on increasing the gas rates as the Oil and Gas Regulatory Authority (OGRA) has already set a 45-50% hike in gas prices on June 2, 2023.

The implementation of the decision to hike power tariffs is set to begin from July 1, with the tariff increasing to Rs 29.78 per unit from the current Rs 24.82 per unit.

Consumers who use TOU (time of use) meters will have to pay up to Rs 49.35 per unit. Now they will have to pay Rs 49.35 per unit during peak hours from 5 pm to 11 pm and Rs 33.03 for off-peak hours.

The decision has become a double whammy for Karachiites as Nepra has also increased the monthly fuel duty adjustment for the month of May by Rs 1.44 per unit, which will be reflected in the July billing.

However, the benefit of increase in base tariff will be applied differentially across all classes.

Some categories will see a lower hike, while for some the hike could be as high as Rs 6 per unit, depending on the government’s decision.

The power regulator has fixed an average increase of Rs 4.96 per unit in the base tariff.

In addition to the new base tariff of Rs 29.78 per unit, end consumers will also have to pay a financing cost surcharge of Rs 3.23 per unit from July 1 to generate Rs 335 billion to finance the debt and liabilities of the power sector, which That’s Rs 2. 6 trillion.

In addition, they will also continue to pay tariff rationalization surcharge of Rs 0.47 per unit.

In an increase of base tariff of Rs 4.96 per unit, the share of capacity duty payment has gone up to 70%, which is Rs 3.472 per unit, and 30% of energy value.

The new base tariff hike has been calculated at a dollar value of Rs 287, inflation of 17% and power generation growth of 7%. Consumers will have to pay capacity charges of Rs 1.874 trillion in tariffs, up from Rs 1.251 trillion in 2022-23.

The ultimate power consumer in Pakistan is being virtually robbed to hide the endless inefficiencies in the power sector apart from paying the actual cost of power.

They are also being charged Tariff Rationalization, Finance Cost Surcharge, Electricity Duty, PTV License Fee, GST, Income Tax, Surcharge, Additional Tax and Sales Tax.

A consumer actually pays 31% in the form of surcharges, fees and taxes apart from the actual cost of electricity.

Electricity duty, a provincial fee, is levied on all consumers ranging from 1.0% to 1.5% of the variable charge General sales tax (GST) is levied on all consumers under the Sales Tax Act 1990 at the rate of 17% of the electricity bill. ,

Consumers who are non-tax payers are charged income tax at different rates depending on the applicable tariff and amount of electricity bill and commercial consumers are charged income tax at 5% on bills up to Rs.20,000 and 7.5% on bills above Rs.20,000 Is.

Additional tax at the rate of 3% is being levied on all consumers without Sales Tax Return Number (STRN), except domestic, agricultural, bulk consumers and street light connections.

The increase in electricity duty was an important requirement by the IMF for providing financial assistance to Pakistan.

The IMF has urged the government to continue raising tariffs and eliminate power subsidies as part of efforts to reduce the country’s fiscal deficit.

However, Nepra attributes the reason for the tariff hike to factors such as low sales growth, rupee depreciation, high inflation, exorbitant interest rates and addition of new capacities.

The estimated total revenue requirement for distribution companies in the financial year 2023-24 is estimated to be Rs 3.281 trillion with an estimated sale of 110,165 GWh.

During the last financial year, the base tariff was increased by Rs 7.91 per unit, with an impact of Rs 2.8 trillion, but was implemented in three phases at intervals.


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