National Electric Power Regulatory Authority has increased prices of electricity by Rs1.27 per unit, according to a notification released on Wednesday.
After the hike, the new price will be Rs9.95 per unit, which will be applicable for 12 months. However, this increase will not be applicable to customers of K-Electric.
Nepra had proposed to raise tariffs of power distribution companies by Rs3.82 per unit, but the PTI government deferred the decision in all the meetings of Economic Coordination Committee, a top government body responsible for making key policy decisions.
In late October, the Finance Minister Asad Umar had instructed the distribution companies to overcome power theft and stop leakages in the transmission and distribution system. “If we can’t improve the power distribution system, we shall not put the burden on the public,” had Umar told ECC on October 22.
In the financial year 2017, distribution companies’ line losses were 18% of the electricity they purchased from power producers—three out of 10 distribution companies have line losses in excess of 30%.
Under the current situation, it is necessary to improve the distribution system, Umar said. Unless the system of receivables improves, the government will not increase the price, he added.
However, the pressure was mounting on the cash-strapped government due to inter-corporate losses in the power sector and the price increase was inevitable. The industry was expecting a hike of Rs2 per unit, but the government gave approval for only Rs1.27.
The government is considering an increase in prices because it doesn’t have enough money to continue to pay subsidies on electricity losses. The inter-corporate debt, loans, and liabilities of the power sector are at an all-time high of Rs1.15 trillion.
The transmission and distribution losses are one of the major problems facing the power sector. Since all distribution companies are owned by the government, their losses have to be subsidized by the taxpayers and consumers. After the latest hike, the government will be able to raise Rs226 billion from the consumer.