The National Electric Power Regulatory Authority (Nepra) has announced an increase in electricity tariffs by Rs 2.56 per unit. This hike, effective from August, is expected to generate an additional Rs 33 billion from consumers across Pakistan. The new tariff is part of the monthly fuel cost adjustment (FCA) for June and will be reflected in the electricity bills issued in August.
However, this increase will not impact all consumers equally. Lifeline consumers, who use minimal electricity, and K-Electric customers in Karachi will be exempt from this hike. The decision marks the second consecutive rise in electricity tariffs, following a Rs 3.33 per unit increase in May, which was collected from consumers in July. Nepra had previously permitted ex-Wapda distribution companies (Discos) to collect an additional Rs 41 billion in July.
Reasons Behind the Tariff Increase
According to a notification from Nepra, the Central Power Purchasing Agency (CPPA), responsible for acquiring electricity from power plants on behalf of distribution companies, initially proposed an increase of Rs 2.63 per unit. After thorough deliberation during a hearing on July 31, Nepra approved a slightly lower increase of Rs 2.56 per unit.
This decision comes at a time when the country’s power sector is under significant scrutiny. A recent Nepra inquiry revealed that millions of consumers across Pakistan received inflated electricity bills during the April-June period. These inflated bills were the result of customers losing their right to reduced rates and slab benefits, particularly impacting lifeline consumers who use 51-100 units per month and those in the protected category, consuming up to 200 units monthly. Many of these consumers were pushed beyond their monthly consumption ceilings, leading to higher rates than their actual electricity usage warranted.
Government Response to Power Sector Criticism
Amid growing criticism over capacity payments to independent power producers (IPPs) and the overall financial health of the power sector, the government has taken steps to address these issues. On August 5, a task force was established to investigate both financial and operational problems within the sector. Prime Minister Shehbaz Sharif appointed former caretaker energy minister Muhammad Ali as a special assistant on energy and co-chairman of the task force. Mr. Ali has already conducted a review of the IPPs and recommended a forensic audit to better understand the financial dynamics at play.
Former caretaker minister Gohar Ejaz emphasized that the nation is closely monitoring the task force’s efforts. The group is expected to review the shortcomings in the electricity sector and the issues surrounding IPP capacity payments within 30 days.
Impact on Industry and Economy
The rising electricity costs are not only a concern for households but also for Pakistan’s industrial sector. Exporters have warned the government that the increasing energy costs could make it challenging to accept export orders from international clients. Domestic industries are already feeling the pinch, with many passing the increased electricity costs onto consumers through higher retail prices.
As the government continues to navigate these challenges, the impact of the tariff hikes and the overall situation in the power sector will be closely watched by consumers, industry leaders, and policymakers alike.
