Saturday, July 20, 2024

Government Hikes Power Tariff for all Discos Including KE, Bills to Inflate up to 50% July onwards

Customers across Pakistan should prepare for inflated electricity bills July 2023 onwards as multiple tariff charges applied by the Government of Pakistan come into effect.

  • Base Tariff Hike of up to PKR 7.5/unit. This will raise the base tariff to up to PKR 49/unit excluding taxes. This decision is in line with the requirements imposed by the International Monetary Fund (IMF) to reduce Pakistan’s fiscal deficit by eliminating power subsidies and raising tariffs. This increase is applicable on all customer categories except for lifeline customers (those customers who have single-phase meters with sanctioned load upto 1 kW using up to 100 units for 12 consecutive months) and protected customers (those single-phase metered customers who use up to 200 units electricity for 6 consecutive months). Details of this are available here:

  • Up to PKR 3.23/per unit levied as Additional Surcharge (PHL) on power customers across Pakistan from 1st July 2023 to 30th October 2023. This will replace the PKR 3.82/unit that was already levied from March – June this year. Agricultural and Non-TOU residential customers consuming up to 300 units will be charged a lower amount of PKR 0.43/unit while other customer categories will be charged PKR 3.23/unit. This is imposed by the government to pay off interest on the loans of Pakistan Holdings Limited (PHL) and settle part of the national circular debt caused by DISCO inefficiency to control theft and increase recovery.
  • Weaker rupee and high dependency on imported fuel are increasing Fuel Charge Adjustments and Uniform Quarterly Charges across Pakistan. FCA amounts are applied to bills after a rigorous scrutiny by the NEPRA and all decisions are published on the regulator’s website. If fuel costs reduce, power utilities will pass the benefit through to consumers.
  • Increased Further Tax from 3% to 4%. The rate of further tax under Section 3(1A) of the Sales Tax Act, 1990 has been increased vide Finance, Act, 2023 effective from 01 July 2023. Further sales tax is applicable on sales tax unregistered persons (not applicable on domestic customers).

With these hikes, an average customer can expect to pay up to PKR 50 per unit in July (exclusive of taxes) with the highest tariff charged to Time of Use consumers. The proposed increases will be further aggravated by the 18 percent General Services Tax (GST) that is applied on electricity bills. If you were consuming 230 units in June 2023 and expect to consume the same in July, then your bill will inflate from PKR 5,092 to PKR 6,242 in just one month based purely on these cost revisions. Customers using over 700 units of electricity in a month and those who are billed according to Time of Use mode will be much harder hit due to the proportionately higher electricity tariff applicable on them.

Customers can expect that their summer and winter bills will be the highest that they have seen and will need to budget for these tariff increases. Responsible usage of electricity is essential to keep electricity bills affordable. The government has promised that the most vulnerable customer categories (lifeline customers and protected customers who are using below 200 units) will continue to receive the lion’s share of power subsidies. Thus, these customers should focus on restricting their consumption below 200 units every month to avoid these cost hikes. At the same time there is a wake up call across all customer categories to explore avenues for energy efficiency and reducing wastage which can help you shift to a lower slab rate and save money. Just reducing use by 2 units a day can save 60 units a month or up to PKR 3,000/-.

It is important to note that along with the power tariff increase, the IMF has also called for a 45-50 percent increase in gas tariffs. The energy sector’s circular debt, including debts from the oil and gas sector, amounts to over PKR 4.30 trillion.

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