Federal cabinet expected to reduce power tariff by Rs6 for SMEs

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ISLAMABAD: The federal cabinet is expected to reduce power tariff for Small and Medium Enterprises (SMEs) from Rs16 to Rs10 per unit, sources

The decision will likely be taken at the federal cabinet meeting to be chaired by Prime Minister Imran Khan today.

The PM Secretariat had originally instructed the Economic Coordination Committee (ECC) to bring down power tariff for the industrial sector, SMEs in particular, from Rs16 per unit to Rs8 per unit – but the move to reduce tariff by 50% required a massive subsidy worth Rs234 billion.

Instead, the ECC on Monday disregarded instructions from the PM Secretariat, and decided to offer a partial reduction in the range of 25 to 30%.

Advisor to PM on Finance Dr Abdul Hafeez Shaikh was uncomfortable with the concessions for the SMEs when the summary was put before the ECC without spadework. Stressing on the importance of calculating power slabs to determine tariff, Shaikh underscored that the ECC could not decide on the basis of half-baked information.

After pondering over different proposals, the ECC recommended slashing tariff from Rs16 per unit to Rs12.96 per unit for the remaining period of eight months in the current fiscal year. “In that scenario, we have estimated that the government would have to provide an additional subsidy of Rs15 billion for the remaining 8 months,” official sources told The News.

The ECC also recommended taking into account the power tariff of K-Electric that stood at an average of Rs18 per unit. Against the backdrop of a further subsidiary, a new tariff would be required for the power company as well.

The committee also directed Power Division to fine-tune categories of different slabs before presenting it to the federal cabinet.

The official sources believe that the federal cabinet would take the decision keeping in view all pros and cons and it might grant approval of the power tariff for SMEs at Rs10 per unit.

This would require a countrywide subsidy of Rs6 per unit, while the KE consumers at an average subsidy might avail subsidy at Rs8 per unit.

The cabinet’s decision would also come in view of the IMF conditionalities as doling out untargeted subsidies might put the halted IMF program into a more dangerous zone.

Surplus power

Interestingly, the ECC in its meeting held on October 26, 2020 had granted approval for the sale of surplus power available at the incremental rate of Rs. 12.96/kwh to all industrial consumer categories, excluding zero-rated industrial consumers, on the incremental consumption over their respective historical consumption or established benchmark.

The ECC also formed a committee consisting of Dr Ishrat Hussain, Dr Waqar Masood, Federal Minister for Industries and Production Hammad Azhar, Federal Minister for Power Omer Ayub, SAPM Nadeem Babar and SAPM Tabish Gohar to prepare a proposal to include K-Electric in the package and recommend the longevity of the package – one or three years.

The committee is tasked to identify the need for subsidy in the package and find a source for arranging it, and other issues that may come up in the calculation and distribution of that subsidy. 

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