Pak govt accepts one more IMF demand, imposes power surcharge from next fiscal year

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Islamabad [Pakistan], March 3: Pakistan’s government has accepted another International Monetary Fund (IMF) demand, announcing a surcharge of up to PKR 3.23 per unit on electricity consumers across the nation from July 1, Dawn reported.
The decision has been taken to generate PKR 335 billion more in revenue over the next fiscal year to finance the power sector’s debt and liabilities, as per the news report. Consumers of K-Electric will be facing double jeopardy, as the government allowed Karachi power utility to raise the tariff by PKR 1.56 per unit in the current month and then another PKR 6.11 per unit in April and May, to ensure uniform electricity rates on par with other distribution companies in Pakistan.

These decisions were taken at a meeting of the cabinet’s Economic Coordination Committee (ECC), chaired by Pakistan’s Finance Minister Ishaq Dar, which also gave a go-ahead for a PKR 5 billion Ramazan relief package for Utility Stores, PKR 3,900 per 40 kg uniform minimum procurement price for wheat, and a waiver of storage charges on cargoes held at ports for letters of credit problems, according to Dawn report.
The Economic Coordination Committee (ECC) also “approved the proposal (of the power division) regarding the increase in the surcharge for the financial year 2024 to cover Pakistan government’s obligations towards products,” Dawn cited the official statement. The statement said that “further, these charges for FY24 will also be applied to K-Electric consumers to maintain uniform tariff across the country.”

Pakistan government has already given the go-ahead for a PKR 3.39 per unit additional surcharge for the remaining four months (March to June) of the ongoing fiscal year and is currently passing through regulatory procedures for notification. The IMF has called for its continuation throughout the next fiscal to pay off or service about PKR 800 billion debt parked in the Power Holding Private Limited.
The Pakistan government had been resisting the IMF demand for the additional surcharge. However, the Pakistan government surrendered to IMF’s demands to secure an economic bailout and avoid sovereign default, as per the news report.
There would be a 43 paisa additional cost per unit to protected consumers, using up to 200 units under the PKR 335 billion financing plan for a new surcharge in the 2023-24 fiscal year. This surcharge will jump to PKR 3.23 per unit for all other consumers throughout the next year. The average national surcharge will work out at PKR 2.63 per unit.
According to the Power division, the Pakistan government has been empowered under the Nepra law to “collect surcharges from the consumers for the fulfillment of any financial obligation of the federal government with respect to electric power services within the bracket of 10 per cent of the aggregate revenue requirement of all electricity suppliers, as per the Dawn report. This will be applicable across the country, including K-Electric.
Furthermore, the ECC also approved a tariff rise of PKR 1.56 per unit for all KE consumers (except the protected category using fewer than 100 units) with a recovery period of three months (March to May 2023), as per the news report. Apart from this, KE has also charged its consumers another average tariff increase of Rs3.21 per unit for the recovery period of two months (April and May 2023).

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