The government approves a further electricity surcharge to comply with an IMF requirement.

The Federal Government has authorised the implementation of an additional Rs 3.82 surcharge per unit on energy for a four-month period from March 2023 to June 2023 at the request of the International Monetary Fund (IMF).

The implementation of an additional surcharge of Rs. 3.39/unit for a period of four months was approved by the Economic Coordination Committee (ECC) of the Cabinet, which is presided over by Finance Minister Ishaq Dar.

The ECC also approved an extra Rs. 1 per unit for FY 2023–2024 (total surcharge for FY24 becomes Rs. 1.43/unit) for the consumer categories in order to compensate the markup fees for PHL loans that are not already covered by the currently in effect FC surcharge @ 0.43 per unit.

The Cabinet formally approved the decision on February 14, 2023, in Case No. 98/Rule-19/2023.

The aforementioned surcharge of Rs. 1.43/unit is anticipated to generate Rs. 126 billion for the fiscal year 2023–2024, which is insufficient to cover the obligations of the power producers.

The Federal Government is fundamentally obligated to pay for energy services, and this liability is related to the sovereign guarantees.

Inability to pay electricity producers may cause a reduction in generation capacity, which may increase load shedding.

Furthermore, as a sovereign guarantee issued by the Government of Pakistan (GoP) protected the payments to the power producers, the latter must now begin relying on the sovereign guarantees and levying a late payment premium.

According to Section 31(8) of the Regulation of Generation, Transmission, and Distribution of Electric Power Act of 1997 (the Act), the federal government may levy surcharges on consumers up to 10% of the total revenue threshold for all-electric power suppliers in order to fulfil any financial obligations the government may have with regard to the provision of electric power services.

As a result, it is suggested that the surcharge amount be increased to Rs. 335 billion (instead of the Rs. 126 billion originally approved) for the FY 2023–24 and subsequent years for the aforementioned consumer groups until the Federal Government commitments are eliminated.

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