Subsidy withdrawal VS electricity demand


The government intends to either withdraw the subsidy given to lifeline electricity consumers or slash down the existing ceiling of their consumption on which they avail this facility. The new consumption slabs, to which subsidy will be given, range between 150 units to 200 units. Under the dictates of the World Bank and International Monetary Fund (IMF), power sector subsidy was reduced from Rs.300 billion to Rs.211 billion in the previous fiscal year, which will further be brought down to Rs.129 billion during the current year. It will not increase the power sector revenues as electricity demand has nosedived in the past seven years against the highly expensive surplus generation. The increases in power tariff by way of quarterly adjustments, proportionate spike in the amount of taxes and surcharges thereon and levy of fuel price adjustment have depressed its demand from all categories of consumers. Frequent doses of hiking electricity tariff have not helped at all to reduce the ballooning circular debt. It has been agreed in the IMF programme that a quarterly upward revision of electricity tariff from 15-20 percent regularly will take place for domestic, commercial and industrial consumers. In the past this sort of tariff adjustments had depressed exports. It was because of this reason that present government had freezed electricity and gas tariff hikes for four export industries of textile, leather goods, surgical instruments and sport products during the last four months of previous fiscal year. The proposed tariff increase of 14 was deferred to next cabinet meeting. The quarterly tariff hikes does not include the taxes and surcharges that are levied in the monthly electricity bills and which amounts to 30 percent of the billed amount. National Electric Power Regulatory Authority (NEPRA) has approved Rs.1.80 fuel price adjustment per unit from the month of November. The levies such as debt surcharge, electricity duty, Neelum Jhelum surcharge and fuel price adjustment jack up the cost of electricity beyond the financial capacity of all categories of consumers, hitting hard the people of fixed income group. The unwise pursuit of thermal power generation through shady deals under the power generation policy of 1994 had put the yoke of IPPs round the necks of consumers and generation policy of 2013 created a highly expensive surplus electricity generation of 10,000 megawatt, for which demand cannot be created at existing high price. It was the exorbitant cost of energy inputs that caused the flight of capital out of the country and shifting of 40 percent textile industry to developing countries of South East Asia where the tariff of electricity was reasonably low in addition to the price of imported gas. Like the demand for commodities, electricity demand is linked with production and income led economic growth. PML-N leaders frequently claim that economic growth rate was over 5 percent in their last government.