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Government Ready to Introduce New system of Electricity Rates

Caretaker govt proposes the new electricity rates for economic growth.

In an attempt to boost economic growth, the caretaker government is prepared to implement a new system of electricity rates, but there are concerns that home users may lose out on a subsidy valued at Rs 631 billion.

Details indicate that the Power Division has submitted a draft of a new electricity tariff design to the Ministry of Finance in accordance with the directives of the SIFC (Special Investment Finance Council) in order to obtain clearance from the IMF for the new system as the current tariff system.

According to officials, the current tariff is only causing economic suffering; 98% of domestic consumers receive subsidies totaling Rs 631 billion, of which Rs 158 billion comes from the government; industrial, commercial, and high-end consumers are responsible for covering the remaining costs.

Prior to the meeting of the SIFC Apex Committee on January 3, the Power Division was instructed earlier this month to reorganize the electricity tariff system. The goal of the new system is to speed up economic activity.

The Power Division announced during the SIFC meeting that the new tariff structure will be submitted to the Finance Ministry shortly, as part of a briefing on the completion of the restructuring. The IMF will also need to approve the tariff structure. The IMF will receive it from the Ministry of Energy.

In terms of revenue, fixed charges make up 2% and variable charges account for 98% of the overall cost of the energy unit, with consumers bearing the brunt of the remaining 72% of the total cost in the form of fixed and variable costs. The existing tariff fixes revenue at two percent.

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