ISLAMABAD: The Electricity Division reportedly requested an additional subsidy of Rs 136 billion to reduce the price of electricity by Rs 5 per unit (both at base tariff and in FCA) for four months of the fiscal year in progress (March-June 2022) applicable to commercial and domestic enterprises consumers of Discos and KE without consumers having time-of-use (ToU) counters and lifeline consumers, said sources close to the Minister of Energy company registrar.
According to the PM Relief Package, which may have raised concerns within the IMF, World Bank and AfDB, the Fuel Charge Adjustment (FCA), will be capped at Rs 3.0966 for four months for eligible consumers of the PM program.
Hammad Azhar was set to unveil the Prime Minister’s relief package on Friday, but he canceled the scheduled press conference due to the Peshawar terrorist incident which claimed the lives of more than 60 people during the prayers of the Friday at the mosque.
On February 28, 2022, Prime Minister Imran Khan made a public announcement regarding the relief package of reducing electricity prices from March 2022 to June 2022. As per the announcement, clarifications were sought from the office of the Prime Minister and it was conveyed over the phone that the electricity base charge will be reduced by Rs 5 per unit for the relief period.
Power Division has also been informed that in addition to the base rate reduction, Fuel Charge Adjustments (FCA) will be capped at Rs 3.0968 per unit for the relief period (March-June 2022), this which will be reflected in electricity bills in February. , 2022. The amount of FCA in excess of the stated rate of Rs 3.0968 per unit will be absorbed by the government.
“The reduction in electricity tariffs Rs5 will be adjusted by a budget reallocation”
The financial impact of the Prime Minister’s relief package will be borne by the federal government through an additional grant. The relief package will be applicable to commercial consumers and non-ToU (Time of Use) home consumers with consumption of up to 700 units per month, excluding Lifeline consumers.
The uniform tariff determined by NEPRA and notified by the GoP through SRO 182 to 191(1) 2021 of 12 February 2021, as amended from time to time, provides that the monthly FCA mechanism takes into account the adjustment in with regard to the change in the fuel cost component of the purchase price of electricity.
The FCA is passed on to consumers with a two-month lag, i.e. in the March 22 billing month, the January 22 FCA (based on units consumed in January) would be passed on to consumers.
According to Power Division, Rs 5 per unit will be provided as a consumer bill reduction for consumers eligible for the PM relief package which will be established on the basis of the applicable notified tariff schedule (SoT).
In addition, FCA for Jan 22 to be charged on March 22 is expected to be Rs 5.95 per unit, which is to be capped at Rs 3.0968 per unit, will eventually lead to a subsidy requirement of Rs 2.86 per unit. unity. The sources argued that the financial impact of the subsidy requirement of the base rate reduction as well as the FCA capping at Rs 3.0968 per unit for eligible consumers is around Rs 136 billion.
The projected impact of the PM relief program is based on the estimated consumption during the relief period and the assumptions developed for the FCA projections.
FCA for January: Government plans to increase electricity tariff by Rs 6.1/unit
The variation of factors such as changes in demand, changes in consumption mix, changes in production mix, availability of hydel, price of imported coal, prices of LNG and crude oil , variation in economic parameters, availability of resources, modification of the commercial operation date (COD) of the next power plants, etc., will have a major implication on the projections and, therefore, will have an impact on the grant requirements for the PM relief program, which will be taken on an actual basis if required.
Power Division argued that cash requirements for the PM relief program must be budgeted and released in a timely manner as the power sector faces a liquidity crunch that has worsened due to prices current imported fuels. The receivables position as of February 28, 2022 for IPPs was Rs 1.428 billion and private power plants are pushing to maintain the fuel supply chain.
According to Power Division, rising fuel prices require timely injections of cash flow to manage the electricity sector’s liquidity needs.
Power Division, in its summary, submitted the following proposals to the Federal Cabinet; (i) consider and approve “Discos and K-Electric’s all commercial consumers and non-ToU domestic consumers with monthly consumption up to 700 units (excluding lifeline consumers) as eligible for the relief PM; (ii) review and approve the PM relief program of Rs 5 per unit through consumer bill reduction for eligible consumers which will be calculated on the basis of the applicable notified SoT for the period of relief for four months (from March to June 2022); (iii) approve that the FCA from January to April 2022 (which will be invoiced in March to June 2022), notified by NEPRA, be capped at Rs 3.0968 per unit for consumers eligible for the PM relief package The additional cost will be borne by the Federal Government (iii) approve an additional subsidy of Rs 136 billion to the head of TDS including the additional cost of FCA and disburse it to the pro Power Division Relief Program; and (iv) authorize Power Division to notify PM’s back-up file.
Copyright Business Recorder, 2022
