The National Electric Power Regulatory Authority (Nepra) has approved the federal government’s request for a significant hike in electricity tariffs, aimed at addressing the financial stability of the energy sector. The base tariff for domestic consumers will see an increase of up to Rs7.12 per unit, affecting various categories of electricity consumption. This decision, detailed in a comprehensive 52-page document, extends across all power distribution companies (Discos) and K-Electric, ensuring a uniform tariff nationwide.
Tiered Impact and Consumer Relief
The approved hikes introduce a new structure where domestic consumers using up to 200 units per month are exempt from the increase for a three-month period from July to September 2024. For those consuming between 201 and 300 units, the new rate will be Rs34.26 per unit, reflecting a Rs7.12 increase. Similarly, consumers using 301 to 400 units will see their rates rise to Rs39.15 per unit, an increment of Rs7.02.
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Higher consumption brackets also face adjustments: 401 to 500 units will be charged at Rs41.36 per unit (an increase of Rs6.12), 501 to 600 units at Rs42.78 (an increase of Rs6.12), and 601 to 700 units at Rs43.92 (an increase of Rs6.12). Consumers exceeding 700 units will pay Rs48.84 per unit after a Rs6.12 increase.
Commercial consumers will experience a base tariff increase of Rs8.04, bringing the rate to Rs77.15 per unit from July. Agricultural consumers will see their rates rise by Rs6.62 per unit to Rs46.83, while general services will face a hike of Rs6.98 per unit, resulting in a new rate of Rs61.03 per unit. Bulk consumers will also be affected, with an increase of Rs5.51 per unit, setting the new rate at Rs59.96 per unit.
Government Measures and Lifeline Consumers
In line with these adjustments, the Ministry of Energy aims to eliminate subsidies except for lifeline, industrial, and agricultural consumers, ensuring the financial sustainability of the energy sector. Lifeline consumers using up to 50 units per month will continue to pay Rs3.95 per unit, and those using 51 to 100 units will be charged Rs7.74 per unit, maintaining the existing rates.
This tariff hike is part of a broader strategy to secure financial stability and aid in government revenue generation. In June, Nepra announced a nearly 20% increase in the uniform national tariff to secure approximately PKR 3.8 trillion for the fiscal year 2024-2025. This adjustment aims to generate an additional PKR 485 billion in revenue for Discos, essential for securing an International Monetary Fund (IMF) bailout scheduled for July.
Strategic Financial Planning
Nepra has clarified that the government can apply varying rates of increase across different consumer categories through cross-subsidies, ensuring the overall revenue requirements set by the regulator remain unaffected. This strategic financial planning is crucial for the energy sector’s long-term sustainability and economic stability.
Nepra’s decision to approve the tariff hike, while imposing short-term financial burdens on consumers, is a necessary step towards achieving financial stability in the energy sector. With measures in place to protect low-usage consumers and strategic planning for revenue generation, the government aims to navigate the challenges posed by rising costs and secure a sustainable energy future for Pakistan.