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Nepra set to hike base tariff

The hike in power tariff will not be applicable to K-Electric. — APP/File
The hike in power tariff will not be applicable to K-Electric. — APP/File

ISLAMABAD: In order to ensure smooth approval of $3 billion loan by the IMF Executive Board, the National Electric Power Regulatory Authority (NEPRA) is set to increase electricity base tariff for the ongoing financial year 2023-24.

The regulator, according to one of the top officials, has worked out three options for the increase in base tariff, including jacking a base tariff by less than Rs8 per unit, less than Rs7 (Rs6.90) per unit and less than Rs6 per unit.

The tariff department has recommended increasing Rs6.90 per unit but the authority would finalize its decision after an input from the government and internal officials.

“The decision-making authority comprises the chairman and four members. Some of the members are suggesting increasing less than Rs6 per unit to ensure the lowest raise for end consumers. However, the Central Power Purchase Agency (CPPA)-G wants an increase of over Rs8.25 per unit.”

The official went on to say, “NEPRA would upload the decision to its official website on the same day. After that, the government would notify the increase in base tariff, which is a vital prerequisite to ensure smooth approval of $3 billion SBA loan by the IMF Executive Board. The IMF board meeting is scheduled to meet in Washington on July 12, 2023.”

The official said NEPRA had earlier determined the base tariff for FY23 at Rs24.80 per unit but the government notified it at Rs24 per unit. The country’s power sector has become unsustainable because of the mounting circular debt that swelled to a whopping Rs2.646 trillion.

As per the latest circular debt report, the per month inflow in circular debt has increased by 32.59 percent to Rs35.8 billion as compared with the monthly inflow in the circular debt during the same period of fiscal 2021-22, which was at Rs27 billion. “And this bitter fact raised the eyebrows of IMF officials who recently visited the Power Division.”

The IMF had asked the officials to bring down the recovery losses and system inefficiency, which are on the higher side, the official said.

More shockingly, the contribution of capacity charges payments has alarmingly jumped to 65 percent in the new base tariff for the financial year 2023-24 from 53 percent in fiscal 2022-23, owing to which Rs4.48 will be part of the increase in the electricity base tariff.

The base tariff doesn’t include surcharges, taxes, and duties, which is the sole prerogative of the federal government. The power purchase price (PPP) constitutes 90 percent of the tariff. Of this, capacity charges payments share is 65 percent.

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