Electricity price hike on cards to revive IMF program

Electricity price hike on cards to revive IMF program

A substantial hike in the base price of electricity – up to Rs7-7.50 per unit – is expected from July 1, 2022, onwards to ensure the restoration of the IMF program. 

Federal Minister for Power Division Khurram Dastgir Khan said the current average base tariff is Rs16.64 per unit. “It is likely to increase by Rs7 to Rs7.50 per unit to Rs24.14 per unit.”

He said he couldn’t say how much the predicted rise would be because the exercise to decide on it is underway. He said senior officials from his ministry and the National Electric Power Regulatory Authority were involved in the process. He said that after the rebasing process was completed, a new base tariff would be decided and implemented following the announcement of the budget.

As per official sources, the IMF has been asking for a hike in the electricity base rate for 2022-23 for a long time, as new transmission and distribution projects and power plants have been added to the national grid.

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Some of the new projects, which include two nuclear power plants (k-2 and k-3), an 878-km-long 660kV high voltage direct current (HVDC) transmission line, China Hub power plant, RLNG-based power plant at Trimmu, Jhang, Punjab, Engro power plant, and others, are connected to the national grid.

The base tariff is the average cost of energy and includes the costs of power plants, transmission, and distribution, as well as fuel, operations, and maintenance. 

It includes power plant capacity payments, ranging between Rs800 and Rs850 billion per year, and are paid by commoners via tariff, with capacity payments expected to surge to Rs1.4 trillion per year in the next budgetary year 2022-23. As a result of project additions to the system, rebasing power tariffs seems unavoidable.

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