Farmers and exporters are bracing for the worst after the federal cabinet decided to raise the power tariff and eliminate subsidies in order to meet all International Monetary Fund conditions (IMF).
The revised circular debt management plan (CDMP) was approved by the cabinet on Sunday and will be presented to the IMF in the coming days. The government will raise power prices by Rs. 7.91 per unit over four quarterly adjustments, beginning in February-March 2023, continuing through March-May 2023, June-August 2023, and September-November 2023.
The government will charge Rs. 3.21 per unit for the current cycle until March, Rs. 0.69 from March to May, and Rs. 1.64 per unit from June to August 2023, according to the CDMP plan. The government will raise the power tariff by Rs. 1.98 per unit from September to November. Meanwhile, the consumer base tariff will be increased from Rs. 15.28 per unit in June 2022 to Rs. 23.39 per unit in June 2023.
The government has also agreed to phase out the Rs. 65 billion in electricity subsidies for exporters by March 2023. To be sure, the government intends to collect Rs. 51 billion by withdrawing electricity subsidies for exporters and Rs. 14 billion by terminating the Kissan Package electricity subsidies in March 2023. The electricity subsidy of Rs. 12.13 per unit is expected to be removed for the export sector.
Approximately Rs. 250 billion will be recovered from electricity consumers by June 2023. The plan calls for a Rs. 3.39 surcharge per unit. Furthermore, the increase in quarterly adjustments through June will result in Rs. 73 billion. As a result of the quarterly adjustment, electricity could cost up to Rs. 4.46 more per unit this month than it does now.
The government is clearly doing everything in its power to obtain the IMF bailout, and the public will be forced to pay. During last week’s talks, the lender requested a Rs. 4.06 per unit increase in the base tariff, and the aforementioned plan shows that the government has caved in.
Last week, the Power Division proposed several tariff increase options, including a quarterly tariff increase of Rs. 4.26 per unit and an average basic tariff increase of Rs. 7.74 per unit. The average base tariff is around Rs. 24 per unit, which could rise to Rs. 32 per unit by June 2023 under IMF conditions.
If implemented, it will be the government’s second increase in the current fiscal year, following a Rs. 7.91 per unit increase in the base tariff. The first hike did not stop the losses, forcing people (who could afford it) to switch to alternative energy sources. The next hike will be much more difficult, and for many, impossible.