News
Thursday, March 03, 2011
Govt mulls incremental increase in power tariff
* Two percent increase in power tariff likely
By Sajid Chaudary
ISLAMABAD: To overcome the financial loss caused by the country’s power sector, the government is planning to reintroduce an incremental increase in power tariff of 2 percent per month to eliminate the tariff subsidy and recovery of cost of generation, official sources said on Wednesday.
“Six percent power tariff will be increased under the proposed incremental plan from April 1 to June 30. For implementation of the plan, the political leadership will be approached,” official sources said.
A few months ago, the increase in power tariff was estimated at 18 percent for bridging the cost of generation and cost of recovery of electricity through utility bills estimated at Rs 240 billion. Due to corrective measures adopted by the public sector power generation, the transmission and distribution companies have helped save around Rs 100 billion. The corrective measures were: closure of inefficient power generation units costing Rs 27 per unit as generation cost, reduction in line losses, efficiency in generation and other cost cutting measures. The new increase in power tariff of 6 percent in three months, starting from April 1, would now help recover the entire financing gap of Rs 140 billion, as the government has already arranged Rs 100 billion through budget and the banking sector, the sources added.
The government had raised the power tariff between September-November in increments of 2 percent each month leading to a cumulative increase of 6 percent. The 2 percent incremental increase was introduced in the recent past but was stopped due to the national dialogue on economic revival with the major political parties, Pakistan Muslim League-Nawaz, Muttahida Qaumi Movement, Pakistan Muslim League-Quaid and other parties.
The saving of such a huge amount of Rs 100 billion would be instrumental in increase in power tariff by smaller percentage and economic managers of the country would be moving ahead with this plan with incremental increase in power tariff to avoid public and political pressure, explained the sources.
To bridge the financial gap of the power sector, there are only two options available with the government – to borrow from the State Bank of Pakistan or commercial banks or – to increase power tariff in an incremental manner.
Courtesy www.dailytimes.com.pk