Pakistan

Power tariff rebate to be recovered: Miftah


Finance Minister Miftah Ismail on Wednesday cleared the air about electricity relief to the consumers of 300 units a month on account of the fuel cost adjustment (FCA) for the month of June — being recovered in coming months.

“It has been deferred,” briefly replied Miftah while responding to a question whether PM Shehbaz had deferred or waived off the Rs9.90 per unit FCA.

He was addressing a news conference alongside Defence Minister Khawaja Asif.

Last week, the PM’s Office had announced that the premier had waived off the one-time Rs9.90 per unit electricity surcharge from consumers of up to 300 units.

The surcharge was on account of expensive fuel-based electricity produced in June.

However, it will be recovered in next six months’ electricity bills.

“The government does not have fiscal space to waive off the Rs9.90 per unit electricity surcharge as that will require a subsidy of Rs30 billion,” according to an official of the Power Division.

After countrywide protests against the inflated electricity bills in August because of a Rs7 per unit increase in base tariffs; ending last slab lower rate benefit; and Rs9.90 per unit one-time monthly FCA; the prime minister had paused the recovery of the surcharge for one month and staggered the amount over six months.

As per the decision, the protected 11.4 million domestic consumers using less than 200 units have starting paying Rs3.90 per unit in August whereas the remaining Rs6 per unit cost will be recovered at the rate of Re1 per unit in six months, starting from October 2022 to March 2023.

Similarly, the domestic unprotected 4.2 million consumers using less than 200 units of consumption will pay no surcharge this month but the cost will be recovered at the rate of Rs1.65 per unit in six months, from October to March 2023.

It is expected that the same treatment is being meted out to the 201 to 300 units consumers.

The Pakistan Bureau of Statistics reported that the electricity prices in August were 123.2% higher than the same month a year ago, reflecting an increase on three various accounts.

The defence minister disclosed that the government was considering retaining Finance Minister Miftah Ismail after the expiry of his six months ad-hoc term in the middle of next month.

The minister, who contrary to the perception that Prime Minister Shehbaz Sharif had waived off Rs10 per unit increase in electricity prices for consumers of up to 300 units, confirmed that the recovery of the surcharge had only been deferred.

“From the prime minister to media, everyone is satisfied with the performance of Miftah Ismail and the government will consider an extension in his tenure,” said Asif.

He was responding to a question about whether the government would appoint a new finance minister after October 15 or make Miftah either a senator or finance adviser.

“He has done well and we are considering to retain him”, said Asif.

The government may ask a sitting senator, whose tenure is ending in 2024, to vacate the seat for Miftah.

He was appointed the finance minister for a period of six months after PM Shehbaz took office in April this year.

To a question about seeking emergency funding from the International Monetary Fund (IMF) after recent floods devastated thery and the economy, Miftah said he would talk to global lender’s mission chief  but the government still did not have firm figures of the losses, which were estimated in the range of $10 billion to $20 billion.

The finance minister said the meeting had been convened on the request of the IMF.

To a question, Miftah said the ongoing power outages could not end soon, adding that otherwise there would be a further increase in electricity prices. “There is a choice to produce expensive electricity or put up with some power outages,” he added.

The defence minister hoped that the ongoing wave of high inflation might recede in next two to three months. “Within three months, there will be an economic upturn, [power outages will end and the prices of the petrol will also be less than today,” said Asif.

Miftah said that some of the quarterly fuel price adjustment surcharge would end in October, helping in lowering the electricity prices. He added that the prices of petrol and diesel would depend on the international trends.

The government has assured the IMF that as a matter of principle, energy subsidies would be contained to Rs570 billion.

Of this amount, Rs225 billion will be for the tariff differential subsidy arising from the power tariff adjustment path.

After increasing electricity prices by Rs7 per unit in July and August, the government has committed to the IMF that it would further increase the rates by 91 paisas per unit by the end of September.

This will follow automatic increases in electricity prices on account of quarterly tariff adjustments for the July-September period, estimated at Rs3.39 per unit.

The government has promised with the IMF that it would withdraw the electricity subsidy being availed by the agricultural tube wells.

A plan to withdraw subsidy for tube-wells for large-scale farmers will be submitted to the federal cabinet by November 2022.


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