Dilemma: Plug Rs700b hole or provide subsidized power to consumers?

To plug an Rs700 billion hole, the energy ministry has worked out an Rs2.3 to Rs31.60 per unit electricity surcharge, which the inflation-hit consumers will a huge additional burden.

Bad governance, unrealistic budgeting and political decisions to give subsidies to exporters and farmers are cited as the reasons behind this plan.

The report comes as Federal Minister Khurram Dastgir confirmed the media reports that PML-N supremo Nawaz Sharif had directed the government to provide electricity at the least possible rate to the consumers.  

He was talking to media after meeting Nawaz in London. However, some media houses had earlier reported that the PML-N supremo wanted free power supply to those who use less than 300 units

But a report published by The Express Tribune says the enormous amount, which a clear deviation from the Circular Debt Reduction Plan 2023, has also become the biggest stumbling block in the way of the 9th review mission of the International Monetary Fund (IMF).

However, no decision has so far been taken to increase the prices because of their implications on the government’s vote bank.

Separately, a more than 100 percent increase in the gas prices has been discussed with the Prime Minister Shehbaz Sharif on Monday.

There had already been a deviation of nearly Rs400 billion in the first quarter,  the newspaper said while citing sources, adding that the Rs700 billion deviation was still on the lower side and the actual negative impact might be much higher.

It is claimed that the energy ministry has worked out three options to bridge this gap, which is also critical if Pakistan is to remain in the IMF programme. The fourth option is to give the Rs700 billion additional subsidies which, according to one source, would mean an end to the IMF programme.

Under the first option, the energy ministry has proposed that the government will have to increase the electricity prices by Rs31.60 per unit to recover Rs700 billion for five categories of consumers, excluding the industrialists. These include commercial, bulk, industrial, others and general services.

However, the imposition of surcharge would require an amendment to the National Electric Power Regulatory Authority (NEPRA) Act. In this case, the tariff for the commercial consumers would skyrocket to Rs94 per unit and for the industrial consumers to Rs80 per unit, according to the sources.

These options carry huge implications for the inflation-stricken people in addition to having destructive impacts for the industry that was already witnessing negative growth.

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