Business

SIFC directives: New power tariff to be introduced after IMF nod

Published

10 months ago

Farwa

Govt to get a nod from IMF to accelerate economic growth.
Power Division completes task of restructuring existing power tariff.
Total cost of electricity unit comprises 72% fixed charges at present.

ISLAMABAD: In line with the direction from the Special Investment Finance Council (SIFC), the Power Division has deposited the draft of a new power tariff design with the Finance Ministry.

This has been done to get a nod from the IMF to accelerate economic growth as the existing tariff regime is causing economic meltdown.

The SIFC’s Apex Committee, which met on January 3, 2024, directed the top mandarins of the Power Division to restructure the power tariff regime in a way that economic activities could accelerate, top officials in the SIFC Secretariat and energy ministry told The News.

Caretaker energy minister confirmed to The News that the Power Division has completed its task of restructuring the existing power tariff regime and has submitted it to the Finance Ministry, which will take it up with the IMF.

At present, the total cost of electricity unit comprises 72% fixed charges and 28% variable charges. Still, on the revenue side, the fixed charges stand at just 2% and variable charges stand at 98%. The relevant authorities, the officials said, have found a mismatch in the electricity tariff between cost and revenue structure and around 98% of domestic consumers (29 million consumers) are getting a subsidy of Rs631 billion. Of Rs631 billion, the government is providing a subsidy of Rs158 billion but the rest is being borne by industrial, commercial and high-end domestic consumers.

Under the current tariff regime, the government is offering power at the rate of 14 cents to the export industry owing to which Pakistan products are no more competitive if compared with products of Vietnam, Bangladesh and India as their electricity tariff stands at 9-10 cents per unit. All categories of electricity consumers — industrial, commercial and high-end domestic consumers are experiencing higher tariffs which has miserably slowed down the economic activities. Right now, Rs473 billion cross-subsidy is being offered to 29 million protected consumers and some unprotected domestic consumers who consume up to 300-400 units a month.

Restructuring the tariff regime would bring down the wheeling charges from Rs27 per unit demanded by CPPA to a reasonable level to ensure bilateral BtB electricity trade. In the fixed charges of electricity cost, capacity payments stand at 57%, Discos’ assets, including administrative costs, stand at 10% and transmission and market operator’s costs account for 4.5%. The variable charges include fuel cost, maintenance cost and the losses’ impacts. “The authorities are working to increase the tariff of the fixed charges which currently stand at 2% to a reasonable level and bring down the 98pc variable charges to rationalize the existing tariff design.”

The officials said the government intends to end the Rs244 billion cross-subsidy being extended from the industrial sector to protected and unprotected consumers using up to 300-400 units a month.

The withdrawal of cross-subsidy will cause an increase in the tariffs of protected and some unprotected consumers. This will provide the government space to bring down the industrial sector tariff to 9 cents per unit helping the industry to thrive and increase exports. They also mentioned that under the National Electricity Plan 2023-27, fixed charges would increase to 20% in 2027.

Apart from the Rs158 billion subsidy on the part of the government, industrial, commercial and high-slab domestic consumers are extending Rs473 billion cross-subsidy to the protected consumers and some non-protected consumers consuming up to 400 units, whose tariffs did not increase for decades. By doing so, the burden on industrial, commercial and high-slab domestic consumers has increased manifold.

In the last increase in electricity tariff, the non-protected consumers falling in the 1-100 units slab category saw an increase in tariff by Rs3 per unit, those using 100-200 units have an Rs4 per unit hike, Rs5 per unit increase for those consuming 200-300 units slab and Rs6.5 per unit for those in the bracket of 301-400 units as compared to other high-end categories whose tariff was increased by 7.5% in the rebasing of electricity tariff for FY24.

Business

Dar chairs the CCOP meeting; Blue World’s bid offer of Rs.10 billion is rejected.

Published

3 days ago

Farwa

The Foreign Minister/Deputy Prime Minister chaired the Cabinet Committee on Privatization meeting.

Other committee members who attended the conference included the Federal Secretaries of several Divisions, the Ministers of Finance and Revenue, Industry and Food, Commerce, Power, and Privatization.

The CCOP took the PC Board’s recommendation into consideration and suggested that Blue World’s bid of 10 billion rupees for the sale of 60% of PIACL’s shares be rejected. The bid was rejected by the CCOP, who chose to follow the PC Board’s advice.

The government’s determination to sell out PIACL through government-to-government or privatization was reaffirmed by the CCOP.

The CCOP was pleased with the Aviation Division’s evaluation of PIACL’s sound financial standing.

Additionally, the CCOP established a committee, chaired by the Minister of State for Finance, to assess potential transaction possibilities for the privatization of the Roosevelt Hotel and the appropriate modes of adoption in light of existing legal rules.

Prior to its subsequent meeting, the CCOP also ordered that all difficulties be resolved and an agreement for the selling of services to an international hotel be concluded.

Business

The KSE-100 Index has surged by 790 points, resulting in an all-time peak for the stock exchange.

Published

3 days ago

Farwa

The benchmark KSE-100 Index increased by 790 points, marking a new all-time high for the Pakistan Stock Exchange (PSX) at 94,982 points.

The record-breaking performance underscores a surge of optimism and investor confidence in the stock market.

As investors responded to favorable economic signals, the market experienced a significant increase of over 500 points in early trading. Later, the KSE-100 Index reached another record level of 94,786 points after adding 594 points to its upward trajectory.

This positive development comes as the State Bank of Pakistan’s (SBP) foreign exchange reserves saw an increase of $84 million, reaching $11.26 billion during the week ending November 8, according to data released by the central bank on Thursday.

This represents an increase of 0.75% from the previous week. In addition, the nation’s total liquid foreign reserves experienced a modest increase, increasing by $33.7 million or 0.21% week-on-week to $15.97 billion.

In contrast, commercial banks’ reserves experienced a decline of $50.3 million or 1.06%, ultimately settling at $4.71 billion.

Furthermore, the economic team of Pakistan has expressed confidence in the discussions with the International Monetary Fund (IMF). Minister of State for Finance Ali Pervaiz Malik, in an exclusive conversation with Samaa TV, claimed talks were moving in a positive direction.

Highlighting improvements in Pakistan’s economic conditions, Malik noted substantial progress over the past six months to a year. He emphasized that Pakistan’s current economic situation has seen significant enhancement, with a reduced current account deficit of only $100 million in the first quarter, a reflection of the government’s strategy to increase remittances and boost exports.

Malik shared that discussions with the IMF are primarily focused on external financing, and while there have been speculations about a potential mini-budget or an increase in the petroleum levy, he clarified that these are currently premature considerations.

Business

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

Published

4 days ago

Farwa

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.