ISLAMABAD: The government has decided not to increase electricity tariff this month because of lower utilisation of power subsidy earmarked for the current fiscal year.

“No more tariff increase during the current financial year (ending June 30)”, a senior power ministry official told Dawn on Friday. He said the decision had been taken in view of acute power shortage that could not politically go along with a two per cent increase in tariff originally envisaged under an understanding with international lending agencies.

He said the finance ministry had given a revised power sector subsidy ceiling of Rs142 billion for the outgoing financial year after consultations with the lenders. But budget exercises completed early this month suggested that the subsidy would be at Rs139.5 billion.

“We have achieved a fiscal cushion of about Rs2.5 billion by lower utilisation of the ceiling and there is no justification for a tariff increase during the current month. Secondly, it will be politically unfeasible to increase tariff when people don't get enough supplies and there are street protests in many cities,” the official said.

He said the Pakistan Electric Power Company (Pepco), which looks after financial and operational affairs of distribution and generation companies, had been asked to submit a business plan to meet next year's subsidy ceiling of Rs102 billion.

The official said the business plan would envisage recovery of longstanding electricity bills and reduction of line losses. “Every effort will be made to bridge the financing gap through recoveries and loss reductions to ensure that consumers are not burdened even during the next fiscal year,” he added.

The water and power ministry has convened a meeting of power companies on Tuesday to finalise next year's business plan for the power sector before Pepco is practically abolished on June 30 as announced by Finance Minister Dr Abdul Hafeez Shaikh in his budget speech.

Another official said that Pepco, which has survived more than 12 years through several extensions although it had been created in 1998 for two years, was unlikely to be abolished and could be given another extension to complete the transition process.

The government has assured the lending agencies that it will increase tariff by two per cent every month till full recovery of cost of service. Last month, it announced a two per cent, or up to 27 paisa, per unit increase for all consumers across the country through a special equalisation surcharge.

The surcharge was imposed to cover a legal problem arising out of the National Electric Power Regulatory Authority (Nepra) Act under which the government cannot increase tariff beyond the benchmark tariff of Islamabad Electric Supply Company determined by Nepra and currently being charged at a uniform rate across the country.

Since the tariff of other power companies was comparatively high and did not meet the average electricity cost, the government used its powers under a previous finance bill to impose the special surcharge.