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Officials propose cut in Aug, Sept electricity bills amid countrywide protests

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1 year ago

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  • Development comes as protests intensify across country.
  • Proposed cuts to be applied in bills across 6 winter months.
  • Suggestions include 30% to 35% reduction in power bills.

ISLAMABAD/ PESHAWAR: In the wake of mass protests against the hike in electricity bills and additional taxes across the country, top officials in the power and finance divisions have proposed recommendations on providing immediate relief to the public suggesting deductions in the bills for August and September, The News reported.

The proposals will be presented before Caretaker Prime Minister Anwaar-Ul-Haq Kakar during the upcoming federal cabinet meeting scheduled for today (Tuesday).

The development came as inflation-hit people have taken to the streets in many parts of the country against inflated bills.

While the specifics regarding the meeting remain undisclosed, insiders told The News that one potential suggestion involves a partial cut in electricity bills for August and September, which would serve as an initial relief measure. However, the proposed cuts would be applied to consumers’ bills across the six winter months, in a staggered manner, mitigating the immediate load on consumers.

The government, furthermore, has decided not to immediately transfer the effects of the latest quarterly adjustment tariff from FY23, which stands at Rs5.40 per unit, over the next quarter. Instead, the plan is to gradually apportion this increase across the six-month winter period, spanning from October 2023 to March 2024.

By adopting this staged approach, the sharp increase in prices can be lessened, resulting in a decrease in the tariff rate from Rs5.40 per unit to Rs2.31 per unit during the winter season.

The impact of Rs1.24 per unit of the third quarter of FY23 would end in September 2023. In the winter season, electricity consumption goes down to just 10-12kMW, owing to which the electricity bills would tumble.

So the government has decided to pass some part of the inflated bills of August and September to consumers in six months of the winter season. However, there are some suggestions that 30% to 35% of the electricity bills should be reduced from the electricity bills, which would be passed on to consumers in the winter season in a staggered manner.

As far as the deduction of taxes of general sales tax (GST), withholding tax (WHT) and surcharges from electricity bills is concerned, the finance ministry would have to take the IMF on board. However, the official said that the IMF might not give its nod for a compromise on the tax revenue generation target, which is Rs9.2 trillion; therefore, there seemed no relief in the form of reduction in GST and WHT taxes.

Meanwhile, the federal cabinet ascertained startling disclosure that the average power tariff has gone up by Rs14 per unit, jacking it up from Rs35 to Rs49 per unit through annual rebasing, which the government has collected through electricity bills in August 2023.

The Ministry of Power informed the cabinet that the exchange rate of Rs286 against the US dollar was used to determine the base tariff for the current fiscal year, compared to much less for the last financial year. It left the government with no option but to raise the Annual Rebasing (AR) tariff to the tune of Rs7 per unit.

Now the federal cabinet would have two options — either to abolish the AR collection of Rs14/unit, collected through August 2023 electricity bills, or collect it in shape of staggered manner.

There is a proposal to collect Rs2 per unit during the next six-month period of the current fiscal year. There is no possibility of any relief in taxes including GST and WHT at a time when the country is under the International Monetary Fund (IMF) programme.

During scrutiny, the cabinet came out with a disclosure that the National Electric Power Regulatory Authority (Nepra) determined an AR tariff of Rs7 per unit, but the previous government made it effective in July 2023. The Ministry of Power could not recover Rs7 per unit Annual Rebasing of tariff in July 2023.

The AR tariff was implemented in August 2023, so the electricity bill tariff went up by Rs14 per unit in one go. Thus, the average tariff has gone up from Rs35 to Rs49 per unit with effect from August 2023, and such a massive hike in power bills caused hue and cry all across the country.

The official said that Pakistan’s power sector was witnessing the monster of capacity charges, which was standing around Rs18 per unit. The capacity charges turned from Rs1.3 to Rs1.6 trillion and there is a need to bring it down through utilisation of incremental package for industries. This average tariff on account of capacity payment needs to be brought down from Rs18 to Rs6 per unit in order to align it with the best international practices.

“Without tackling the capacity charges issues, the cash bleeding power sector cannot be fixed,” said the official.

When The News contacted the top guns of the power sector to ask about the adoption of a conservation plan to reduce utilisation, they said capacity charges would not reduce with the help of a conservation strategy. There is a need to adopt a multipronged strategy including revising the agreements with IPPs in order to reduce the capacity charges.

So far, the Ministry of Power has struck revised agreements with certain IPPs, but it resulted in a reduction of just Rs0.85 per unit. However, there are certain power producers including power projects related to China–Pakistan Economic Corridor (CPEC) and some others where there was no revision in tariffs, so there is a need to find amicable solutions on a permanent basis.

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Positive IMF negotiations propel KSE-100 Index above 94,000 points

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22 hours ago

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As a result of investors’ optimism about the reported progress in the continuing talks with the International Monetary Fund (IMF), the Pakistan Stock Exchange (PSX) experienced a robust surge.

The benchmark KSE-100 Index of the PSX, which tracks market sentiment, rose 713 points to a new record high of 94,068 points, breaking above the 94,000-point barrier, as the trading session began.

Early in the day, the stock market began its upward trajectory as the KSE-100 Index steadily rose, gaining 574 points to reach 93,932 points. A possible agreement with the International Monetary Fund (IMF) might lead to more fiscal stability and back Pakistan’s economic reforms, which is why investors are so optimistic about the country’s future.

Officials from the Federal Board of Revenue (FBR) informed the International Monetary Fund (IMF) on Wednesday that the government would not be introducing a mini-budget and would instead continue to aim to collect Rs12,970 billion in taxes each year.

In line with continuing discussions with the Fund, FBR sources revealed that petroleum goods will not be subject to the General Sales Tax (GST).

The fact that Pakistan’s tax-to-GDP ratio has increased from 8.8% to 10.3%, a 1.5% gain viewed as a favorable sign of Pakistan’s fiscal policies, has reportedly pleased the IMF, who has voiced satisfaction at Pakistan’s recent economic performance.

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Provinces must inform IMF team of the postponed legislation for 45% agricultural tax.

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22 hours ago

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The visiting International Monetary Fund (IMF) delegation is scheduled to meet with provincial government leaders today to examine progress in implementing a tax on agricultural income of up to 45% and discuss the execution of other fiscal policies.

The agricultural income tax was to go into effect on January 1, 2025, after the provincial governments were given until October 31 to pass the necessary legislation. Nevertheless, the deadline was missed by every single province.

Rumor has it that neither Sindh nor Balochistan have moved forward with the tax on agricultural income bill, despite approval from the Punjab government and a draft being developed in Khyber Pakhtunkhwa.

All four provinces have signed the National Fiscal Pact as per the conditions set by the IMF. The reason(s) for the delays will be explained to the IMF delegation.

Federal spending on things like healthcare, social security, and regional infrastructure development is expected to be transferred to the provinces under the IMF agreement, according to sources from the Ministry of Finance. Provincial governments have been singled out by the IMF delegation as key players in tax and economic reform efforts.

Reviewed Here: FBR Excludes Mini-Budget and GST on Petrol from IMF Negotiations

The provincial budget surplus targets will also be briefed to the IMF delegation, according to the sources. The four provinces were supposed to achieve a total surplus of Rs342 billion in the first quarter, but they only managed to manage Rs182 billion. A large portion of the deficit was caused by the Rs160 billion budget deficit in Punjab.

The government’s pledge to retain the annual tax target of Rs12,970 billion was reaffirmed by the Federal Board of Revenue (FBR) on Wednesday, who also confirmed that no mini-budget will be implemented.

In line with continuing discussions with the IMF, FBR sources have also said that petroleum goods will not be subject to the General Sales Tax (GST).

According to sources, the International Monetary Fund has voiced its approval of Pakistan’s recent economic performance, highlighting the country’s improved fiscal policies, which have led to a 1.5% increase in the tax-to-GDP ratio, from 8.8% to 10.3%.

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Petrol prices are expected to experience another increase in Pakistan.

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2 days ago

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The inflation-affected nation is expected to encounter another increase in petrol prices, with recommendations indicating a rise of Rs. 2.58 per litre for petrol and Rs. 5.91 per litre for high-speed diesel.

Sources indicate that, if sanctioned, petrol prices will ascend to Rs. 250.96 per litre, whereas high-speed diesel will be priced at Rs. 261.05 per litre.

Sources indicated that the suggested increase is due to the elevated premium on petroleum products in the worldwide market and rising import expenses.

The premium on imported petroleum products has increased, leading the government to contemplate pricing modifications effective November 16, sources indicated.

On October 31, the federal government published the prices of petroleum products for the upcoming fortnight, increasing the prices of petrol and high-speed diesel.

A notification announced an increase in petrol price by Rs 1.35, raising it to Rs 248.38 a litre. The price of high-speed diesel was fixed at Rs 255.14 per litre after an increase of Rs 3.85.

Also read: Pakistan’s weekly inflation jumps to 15.02pc

Simultaneously, the costs of light diesel and kerosene oil were reduced. The statement states that kerosene oil is priced at Rs 148.5 per litre following a reduction of Rs 4.92.

The cost of light fuel was reduced by Rs 2.61 to Rs 147.51 per litre.

The rampant hike in the prices came at the time when the weekly inflation, measured by the Sensitive Price Indicator (SPI), witnessed an increase of 0.28 percent for the combined consumption groups during the week ended on October 17, the Pakistan Bureau of Statistics (PBS) reported.

According to the PBS data, the SPI for the week under review in the above-mentioned group was recorded at 319.79 points as compared to 318.91 points during the past week.

In comparison to the same week last year, the SPI for the combined consumption group during the reviewed week experienced a 15.02 percent increase.

The weekly SPI with the base year 2015-16 =100 covers 17 urban centres and 51 essential items for all expenditure groups.

Likewise, SPI for the lowest consumption group of up to Rs 17,732 witnessed increase of 0.27 percent and went up to 313.74 points from last week’s 312.91 points.

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