To meet the IMF conditionalities and to curtail rising circular debt the government is likely to increase the electricity tariff by Rs 3.34 per unit very soon.
Sources in Nepra confirmed that the summary has been finalized, which states that the Power Division will be allowed to hike the average tariff from an existing level of Rs 13.35 to 16.69 per unit. The summary is soon to be presented in Cabinet for the approval of the Prime Minister.
The circular debt, commonly known as power sector payables, grew at an average rate of approximately Rs1.5bn per day (Rs45bn per month) in 2019-20 to reach Rs2.3 trillion.
Recently, Prime Minister Imran Khan confessed that to curtail rising circular debt has been the biggest challenge for his government, by paying Rs 3 per unit from its own pocket to maintain the equilibrium between receivables and payables of the power sector.
Apart from the privatization of loss making public sector entities, the IMF gave a deadline to the government to bring the circular debt to zero in December. However because of COVID-19 related economic crisis and by the relief given to the industrial and commercial consumers on electricity tariff, the Power Division expressed its inability to meet the deadline.
Since the government wants the revival of the IMF programme soon, it will be taking key decisions and along with its implementation over the next couple of weeks.
Sources in the Power Division confirmed that the prime minister had already been told that an increase in electricity tariff would be crucial for renegotiations with IMF.
Sources in Nepra said that the increase in the electricity tariff is already under process. To curtail the circular debt, NEPRA directed the three distribution companies MEPCO, GEPCO and SEPCO to recover Rs 916 billion from the consumers as arrears.
From the Multan region, Mepco was asked to recover Rs 553 billion and fix their average tariff at Rs 16.52 per unit for FY20. Whereas from Gujranwala Division, Gepco was asked to recover arrears of Rs 334 billion and fix average tariff at Rs 15.69 for FY20. From consumers of Sukkur, Nepra directed to SEPCO to recover Rs 16 billion as distribution tariff. Sources in Nepra said that eight distribution companies including Sepco already started the recovery of arrears from consumers.
In 2020, the electricity prices increased by Rs 8.04 in account of fuel adjustment charges. Despite low oil and LNG prices, the electricity tariff was raised nine times and it decreased only thrice in this outgoing year.