Power tariff raised to meet IMF target – Newspaper

ISLAMABAD: To meet another objective before a meeting of the Executive Board of the International Monetary Fund (IMF), the government approved on Thursday an increase of 26 paisa per unit in the electricity tariff, instead of 15 paisa allowed by the regulator of Energy.

This decision was taken at a meeting of the Cabinet Economic Coordination Committee (ECC) that also further increased the price of wheat aid in Rs15 by 40 kg to Rs1,365 and exempted two LNG-based energy projects in Punjab from & # 39; take or pay guaranteed & # 39; 66 percent of gas quantities to facilitate its privatization that can add a minimum subsidy of Rs117bn to the budget.

The ECC meeting was chaired by the adviser to the Prime Minister on Finance and Income, Dr. Abdul Hafeez Shaikh.

In a summary of the energy division, the ECC "approved the proposal to notify the quarterly adjustment approved by Nepra of 15 paisa per unit after incorporating an additional charge of 11 paisa per unit to maintain a uniform rate in all categories of consumers , except for domestic and lifeline consumers, "said an official statement. The increase that will take effect on December 1 for 12 months would not apply to approximately 20 million using up to 300 units per month, of the total 30 million consumers, while 600,000 of the remaining 10 million consumers would only pay seven paisa for unity as a result of this increase.

Dr. Shaikh also formed a committee, led by himself and composed of the Minister of National Food Security and Research, Makhdoom Khusro Bakhtiar, the Adviser to the Prime Minister on Trade and Investment, Razak Dawood, and Special Assistant to the Prime Minister on Petroleum , Nadeem Babar, to examine the current framework. to determine the energy rate and make it simpler, following the pattern of mature market practice for automatic quarterly adjustments.

This is in line with the memorandum of economic, fiscal and monetary policies delivered to the IMF before its managers and executive directors approve a recently concluded agreement between a mission of the Fund and the Pakistani authorities to allow the disbursement of approximately $ 450 million.

As such, the average electricity rate has now reached Rs13.77 per unit of the current Rs13.51 per unit, excluding general sales tax, monthly fuel price adjustments and some other taxes and tariffs.

In recent months, the government has increased the electricity rate due to the quarterly adjustments of the previous fiscal year (2017-18) by about Rs 2.33 per unit. The government also committed to the IMF to guarantee "periodic and timely notifications of the rates to the final consumer in the electricity sector" through an automatic mechanism.

Wheat support price

The ECC also increased the minimum support price for wheat from the previously announced rate of Rs 1,350 per 40 kg on November 16 to Rs 1,365 per 40 kg, in view of the representations of various associations of farmers and producers, as well as the cabinet federal and the Special Committee of Agricultural Products of the National Assembly, which had proposed to reconsider the minimum price of support to compensate farmers in areas where the cost of wheat production increased to Rs1349.57 per 40 kg.

Previously, the Ministry of National Food Security and Research informed the ECC about the comments received from various farmer associations, as well as from different government forums, and requested that the minimum support price for wheat be set at Rs 1,400 per 40 kg.

The ECC deliberated on the proposal and, in view of the discussion and contributions on the impact of any additional increase in the price of wheat on food inflation and the financial impact on commodity stock operations, decided to raise the price minimum support of wheat at Rs1,365 per 40kg.

The ECC also saw a presentation by the Ministry of Finance on government commodity operations that over the years had resulted in debts and liabilities of Rs757bn and recommendations to reduce debt.

LNG plant sale

At the request of the energy division, the ECC meeting also decided to exempt two LNG-based power plants, Haveli Bahadur Shah and Balloki, from its 66pc guaranteed LNG take-off or payment, although he pointed out that the government would have to endure A charge of Rs117 billion of subsidy annually to meet the price differential between Qatar LNG and any other alternative or fuel source given the decline in furnace oil prices.

It is estimated that the two power plants yield around Rs300bn in privatization revenues. The energy division had submitted a set of proposals for risk mitigation after the privatization of the National Energy Park Management Company, in particular the impact on the price of the fuel basket due to the 66pc not generated or reduced in accordance with the rules of the Energy Purchase Agreement until 2024 and the cost of diverting liquefied natural gas regasified to other sectors with viable options to mitigate the risk.

He suggested diverting LNG to a new project that was approaching Karachi and some other sectors, but it was noted that other sectors did not have enough sustainable appetite for LNG. The ECC discussed the proposals in detail and approved them on the condition that any other option that could be considered as part of the mitigation plan should also be considered and approved, if necessary.

NHA loans

The ECC also considered a proposal by the Ministry of Communications that more than Rs1.8 trillion loans for the development of cash (CDL) and foreign loans, whether direct or regent, including accrued interest in this regard, received until 30 June 2019 by the National Highway Authority (CNS) will become a government grant or will be "canceled."

The summary required that, for the future, all assignments of the Public Sector Development Program, including direct or direct loans, both the rupee and foreign exchange component for non-commercially viable projects and for strategic or defense roads, be granted to the NHA as a government grant.

The summary also suggested that CDLs should only be advanced for commercially viable projects in which the Finance and NHA Division mutually agree with respect to the terms and conditions of the loan and its repayment, or these viable projects can be undertaken by NHA in partnership or public-private construction, operate and transfer mode of financing.

Posted in Dawn, November 29, 2019

Source: https://www.dawn.com/news/1519447/power-tariff-raised-to-meet-imf-target

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