The National Electric Power Regulatory Authority (NEPRA) on Friday announced an average Rs. 4.96/unit increase to the base electricity tariff for fiscal year 2023-24, fulfilling a condition set by the International Monetary Fund (IMF) for the recently-inked $3 billion stand-by arrangement (SBA).
The additional tariff would enable the government to collect Rs. 3.281 trillion from power consumers nationwide for the ongoing fiscal year, with effect from July 1. Currently, the average per unit cost of electricity is Rs. 24.82, which would climb to Rs. 29.78/unit with this month. NEPRA’s statement cited the rupee’s devaluation, high inflation and interest rates, addition of new capacities and overall low sales growth as key reasons for the need to increase the tariff.
NEPRA has projected the total revenue requirement for distribution companies in the FY2023-24 at Rs. 3.281 trillion, with estimated sales of 110,165GWh.
While the NEPRA statement did not mention the IMF requirements, one of the key demands of the global lender for the SBA was for the government to ensure “further progress on structural reforms, particularly with regard to energy sector viability and SOE [state-owned enterprise] governance.”
According to NEPRA, consumers who use time of use meters would pay up to Rs. 49.35/unit during peak hours from 5 p.m. to 11 p.m., while they would pay Rs. 33.03/unit for off-peak usage. However, it said, the tariff increase would not be passed onto different slabs of consumers uniformly, with some categories facing an increase lower than Rs. 4.96/unit and some suffering an increase of up to Rs. 6/unit.
Additionally, said NEPRA, end consumers would also be charged a financing cost surcharge of Rs. 3.23/unit from July 1 with an aim to generate Rs. 335 billion to finance the power sector’s circular debt, which has increased to Rs. 2.6 trillion. Consumers would also be charged a Tariff Rationalization Surcharge of Rs. 0.47/unit.
Authorities said the base tariff increase had been calculated by considering the value of the U.S. dollar at Rs. 287, with 17 percent inflation and power generation growth of 7 percent. They also noted that the applicable average national tariff would now rise to Rs. 50-56/unit after including various surcharges, taxes, duties and levies, and monthly and quarterly fuel adjustments.
This is the second major jump to the electricity tariff in less than a year. Last year, the government announced a Rs. 7.91/unit base tariff increase, imposing an additional financial impact of Rs. 893 billion on consumers. However, this was unable to curb the circular debt, which has sustained and increased over the past year.