The government on Monday directed the National Electric Power Regulatory Authority (NEPRA) to immediately approve the first part of its three-phased subsidy rationalization plan envisaging the creation of four new tariff slabs.
The federal government has already approved policy guidelines to create new tariff slabs in an effort to reduce the power subsidy by around Rs42 billion per annum and has been passed by the cabinet.
At present, 24.5 million (99pc) electricity consumers are getting subsidies of varying degrees. The existing system protects 84pc consumption below 300 units representing 89pc domestic consumers which are about 22 million.
The aim of this policy is to trim down the number of beneficiaries of non-Time of Use (ToU) domestic consumers across the country. It is worth mentioning here that the new slabs would be implemented all over the country, including K-electric.
As mentioned, currently, 22 million electricity consumers are getting subsidies from the government. However, following the new policy, the tariff relief will be restricted to 13.9 million consumers, which will be only through the Ehsaas social welfare program.
Also, the tariffs on consumers that use more than 200 units a month have been increased.
This plan was discussed in a public hearing presided by Chairman Nepra Tauseef H. Farooqi, in attendance of provincial NEPRA members including Member Sindh Rafique Ahmad Shaikh, Member Balochistan Rehmatullah Baloch, and Member KP Engineer Masood Anwar Khan.
The government’s power division led by Additional Secretary Waseem Mukhtar reportedly said that the plan on approval at this stage will not result in any tariff increase to any consumer category, but would ultimately help the government better target the subsidy to the really deserving and administered through cash via Ehsas Programme in next two phases.
Thus, the basic proposal is to divide the slabs according to the economic status of the consumers.
Business recorder reported that Power Division submitted the following plan: (i) expanded definition of the lifeline consumers to include residential Non-ToU consumers with a maximum of last twelve months and current month’s consumption of 100 units; (ii) two rates for 50 and 100 units will continue; (iii) create a new category of protected customers (those consuming 200 kWh per month consistently for the past 6 months); (iv) break the 301-700 slab into four slabs – 301-400, 401-500, 501-600 & 601-700 with the same marginal tariff; (v) each of these slabs would continue to get the previous slab benefit of 300 kWh slab as today; (vi) such adjustment be reflected by way of modification in SRO Nos. 374(1)/2018 to 383(1)/2018 of March 22, 2018, as modified by SRO Nos. 01 to 10 of 2019 of January 01, 2019, and SRO Nos. 182(1)/2021 to 191(1)/2021 of February 12, 2021.
Second and third phases
Business Recorder reported that the second phase envisages a gradual reduction in total net subsidy for unprotected residential consumers. It will also lead to a reduction in cross-subsidy and removal of previous slab benefits
This phase would lead to dividing agriculture tube-wells slab into two categories and reforming subsidies to QESCO tube-wells by subsidizing solarization/modernization of tube-wells.
Moving on, the third phase would involve the reduction of subsidy slabs among different consumers, including, those who are protected via subsidies granted directly by the Annual Budget, those who are unprotected (below cost recovery cross-subsidized by high users), those unprotected at cost recovery, people who are unprotected above cost recovery to cross-subsidize low users.
It would also involve adjusting tariffs of industrial, commercial, and agriculture slabs to have zero net subsidies, and de-linking FATA and AJK subsidies from electricity tariffs.
Nepra, while concluding the hearing, said that it would announce the decision later.
Earlier in March this year, the government told ECC that electricity subsidies for residential consumers should be restricted to the lowest socio-economic class.
It was possible via using Ehsaas socio-economic registry after the completion of a survey and linking the residential electricity meters with the Computerised National Identity Cards (CNICs), the committee was told. At present, the subsidy is provided to consumers of up to 300 units per month.