The government has developed a plan with four options for reducing circular debt, in which the maximum electricity tariff may increase by Rs31.6/kWh through the imposition of a new surcharge, in a last-ditch effort to restart the stalled International Monetary Fund program.
The plan calls for imposing a tax on five different service categories—commercial, bulk, industrial, other, and general while protecting the household and agricultural economies.
According to local media reports, high government officials confirmed on Monday that the cash-strapped power sector was on its way to an unsustainable level, with demands for the current fiscal year potentially rising to a staggering Rs1.73 trillion against an initial budgetary allocation of Rs0.57 trillion due primarily to insufficient budgetary allocations.
The plan includes four primary recommendations, three of which call for raising the energy cost to a maximum of Rs31.6/kWh, or between Rs2.27 and Rs12.59/kWh, by imposing a fee on all five categories of consumers.
Government must change the National Electric Power Regulatory Authority (NEPRA) Act 1997 to impose the fee. The rate for commercial consumers might increase from the current rate of Rs49 per unit to Rs94 per unit under Option 1’s proposal to impose a surcharge of Rs31.6 per unit.
Finance Minister Ishaq Dar told local media on Monday that there was no discussion for raising the power tariff at this time but pledged to examine it in more detail once the plan for decreasing the circular debt was finalized.
The fact that electricity sector losses peaked at over Rs390 billion in the first quarter of the current fiscal year makes it possible to analyze the challenging scenario the industry is currently in. As a result, the circular debt ballooned.