Govt halts major electricity rate hike amid public outcry and political concerns

In response to significant public dissatisfaction and potential political fallout, the government has retracted a recently approved 51 per cent electricity rate increase for so-called protected consumers. This move, initially a compliance measure for the International Monetary Fund (IMF), has been reconsidered following direct intervention by the prime minister.

Last week, the federal cabinet had sanctioned a substantial tariff increase affecting even the protected consumers— those using less than 200 units per month. However, on the prime minister’s instructions, an urgent revision of this decision is being processed. The National Electric Power Regulatory Authority (Nepra) has subsequently postponed its public hearing from July 8 to July 10 to accommodate this revised summary.

Prime minister’s directive came after warnings from various quarters about rising public anger due to accumulated electricity bills, exacerbated by higher consumption during the Eid-ul-Azha holidays and ongoing hot, humid weather. Reports of consumer backlash, including violence against distribution company officials, have heightened the urgency to reassess the rate hike.

Before departing for Quetta, the prime minister ordered the modification of the tariff summary to exclude protected consumers from the increase. The revised summary, circulated by the power division, aims to cover the resulting Rs50 billion revenue gap through government subsidies and innovative tariff setting.

The tariff hike was scheduled to take effect from July 1, 2024, for all ex-Wapda distribution companies (Discos) and K-Electric, as part of the IMF’s structural benchmarks. Although Nepra had already determined an average 20pc increase (Rs5.72 per unit) in the national uniform tariff to secure Rs3.8 trillion in funding for the fiscal year 2024-25, the public hearing remains largely a formality.

The initial summary approved by the federal cabinet proposed a 51pc tariff increase for protected consumers using up to 100 units per month and a 41pc increase for those using up to 200 units. This decision affected over 15.5 million consumers, including 10.11 million consuming less than 100 units and 5.5 million in the 101-200 unit bracket, who could potentially mobilise in protest.

For unprotected consumers exceeding 200 units in any six-month period, the most significant increase of over 43pc (Rs7.12) to Rs23.6 per unit was suggested for the first 100 units. This category affects 5.95 million consumers. The proposed hikes also included a 31pc and 27pc increase for the 101-200 and 201-300 unit slabs, raising rates to Rs30.1 and Rs34.25 per unit, respectively, impacting another five million consumers.

Households consuming more than 300 units would face a 14pc to 22pc increase (Rs6.12 per unit) and a new fixed capacity charge of Rs200-1,000 per kilowatt, escalating with higher sanctioned load capacities. Agricultural consumers would also see a fixed capacity charge of Rs400 per kilowatt, with tariff increases ranging from 19-44pc (Rs5.75 to Rs6.59 per unit).

Commercial, general services, industrial, and bulk consumer categories would experience a substantial fixed capacity charge increase to Rs1,250 per kilowatt from the current Rs400-500 per kilowatt, alongside a 17pc increase (Rs5.89 per unit) in commercial and general services tariffs.

The power division projects that the proposed tariff adjustments will generate Rs3.5 trillion for the 10 Discos during the current fiscal year, about Rs580 billion more than the previous year. Including the impact of an 18pc GST, total revenue is expected to reach approximately Rs4.2 trillion, with further adjustments for fuel charges and other factors potentially increasing this figure.

The average national base tariff, now at Rs35.50 per unit, is set to generate around Rs3.763 trillion for the fiscal year, compared to Rs3.28 trillion last year. However, the real applicable national tariff, factoring in surcharges, taxes, duties, and other adjustments, is estimated to range between Rs65 and Rs72 per unit.

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