ISLAMABAD: The Economic Coordination Committee (ECC) on Tuesday formally approved subsidy-neutral discounted electricity rates for incremental consumption during the winter months (December to February) to stimulate power usage amid high tariffs and economic downturn.
The initiative — which applies to residential, commercial and industrial consumers — is expected to increase consumption by up to 16 per cent while ensuring compliance with International Monetary Fund (IMF) requirements.
The ECC meeting, chaired by Finance Minister Muhammad Aurangzeb, also approved the transfer of Rs3.14 billion from the erstwhile Emergency Relief Cell (ERC) to the National Disaster Management Authority (NDMA) to carry out its inland and overseas rescue and relief operations.
The decision was taken on the premise that since the balances in the ERC were made up of public donations and were granted for relief, rescue and rehabilitation of floods and earthquake victims, the NDMA would spend these balances for those objectives.
The power division told the meeting that a “recent surge in electricity tariffs coupled with challenging economic conditions had led to reduced demand across various consumer categories”, down by 6pc in winter last year with an additional 8pc in fiscal year 2024. Also, the winter demand, on average, was about 11,196 MW lower than in the summer months.
The power division highlighted the success of previous similar initiatives, which saw consumption rise by 16pc in FY20, 15pc in FY21 and 14pc in FY22. However, demand dropped by 8pc in FY23 and 2pc in FY24.
“Any increase in the electricity demand during winters will not only enable optimum use of system generation capacity, but it will also help reduce gas demand due to the shifting of favourable demand towards electricity,” the power division said.
The package would apply to industrial, commercial, general services, and domestic consumers who use more than 200 units per month across the country, including K-Electric users. It was noted that this may also require additional LNG, which was already in oversupply. The meeting was told that K-Electric consumers had faced challenges due to lower tariffs.
The ECC approved the winter demand initiative for the industrial, domestic — Time of Use (ToU) and non-ToU — consumers exceeding 200 units, commercial and general services consumers of Discos and K-Electric “to enable optimum use of system generation capacity besides reducing gas demand due to the shifting of favourable demand towards electricity”, an official announcement said.
The package would apply to incremental consumption over the past years and includes 18pc to 50pc discounts depending on various consumer categories and consumption slabs. As the package is subsidy-neutral, the IMF is reported to have consented to the package.
Incremental consumption will be calculated using a weighted average formula based on the last three years’ usage. Historical averages will weigh consumption at 50pc for FY2024, 30pc for FY2023, and 25pc for FY2022. For example, an industrial consumer currently paying Rs40 per unit for 100,000 units could reduce their average cost to Rs37.21 per unit by increasing usage by 25,000 units at a discounted rate.
According to the power division, the base rate for domestic consumers is a minimum of Rs37.49 per unit and a maximum of Rs52.07 per unit, but additional consumption would be charged at Rs26.07 per unit for both categories. This would be 30pc cheaper (Rs11.42 per unit) compared to a minimum rate of Rs37.49 and 50pc (Rs26 per unit) compared to the maximum rate.
Published in Dawn, November 20th, 2024
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