Govt to withdraw all general power subsidies.

Byline: Shahbaz Rana

ISLAMABAD -- In a major development, the government has decided to withdraw all general power subsidies and would limit concessional electricity rates to five categories, which is also crucial for revival of the stalled International Monetary Fund (IMF) programme.

The decision has been taken without holding socio-economic survey about the needs and is solely based on the available fiscal space, highly placed sources told The Express Tribune.

Prime Minister Imran Kham has already issued instructions to finalise a mechanism to shift to targeted subsidies regime but the government may face some legal obstacles until it amends the National Electric Power Regulatory Authority (Nepra) Act.

The government is currently in the process of finalising a new mechanism for subsidies aimed at doing away with the current regime of giving electricity subsidies up to 300 units monthly consumption, irrespective of income levels, top officials of the finance ministry told The Express Tribune.

It has now decided to give subsidies only through Ehsaas programme, electricity subsidies on agriculture to be given on landholding-basis and to the areas like Azad Jammu and Kashmir and the erstwhile Federally Administered Tribal Areas (Fata). However, the decision requires approval of the federal cabinet and the legal backing, which have not yet been done.

In addition to targeted regimes, another major change in electricity prices determination which is under consideration is to move away from minimum determined tariff as base tariff for all consumers to average tariff of 10 power distribution companies. This would significantly increase burden of Punjab-based consumers due to increased theft and losses in other three provinces.

In the first step towards targeted subsidies regime, the finance ministry has taken back the control of electricity subsidies regime from the Power Division, according to the budget documents of 2020-21.

The budget documents showed that the government did not make allocations for power subsidies under the grant number 46, which is administered by the Power Division. In the last fiscal year, the allocations under grant 46 were Rs226.5 billion, which for this fiscal year has been reduced to mere Rs105 million.

Instead, the allocation under demand number 66, which is controlled by the finance ministry, has increased from revised Rs442.6 billion to Rs643 billion to give subsidies only to targeted people, according to demand for...