Power Minister Awais Leghari has announced that the government expects to save Rs 1 trillion after negotiating new tariff agreements with IPPs using the ‘whole-of-government’ approach. Reprofiling the debt alone, as was being done with China for the nuclear power plants, would shave Rs 1.50 per unit off the tariff.. Meanwhile, a committee headed by Deputy PM Ishaq Dar would review the taxes, including advance income tax, provincial and federal excise duties, to determine which of them could be removed from the bills. The impact of those taxes is Rs 9 per unit, the cumulative impact is Rs 964 billion, including a provincial share of Rs 563 billion, which means that even a reduction, much less elimination, would upset the budgets of all. The committee has thus been tasked with getting IMF approval for its proposals.
The government has been engaged in an activity in which the electricity consumer, which is to say every householder, business and enterprise in the country, is not really interested in. What concerns the consumer is the result, which, it has been promised, will be a reduction in the tariff. With IESCO, GEPCO and FESCO due to be privatized in 2025, some certainty about the tariff is needed. It is perhaps ironic that the wholesale revision of power purchase agreements has been such a shock for potential investors that it affected the PIA privatisation negatively, and though IPPs are not going on the block, DISCOs are. Mr Leghari also took the opportunity to announce that the buyback tariff for solar power users would also be reduced, to discourage solarisation. Whatever solarization has occurred so far has been for economic reasons rather than environmental concern. Mr Leghari should be ready for a future where consumers switch to solar power, leaving DISCO connections purely as a back-up. The next step, of going off-grid altogether, will happen when storage technologies improve, and then the government will also lose the taxation it is presently deducting.
The government can bring the tariffs down, but it should realise that it need not carry out some dramatic change some time in the future. It would be better to bring it down gradually, as and when the agreements with the IPPs are made. For political benefit, the cumulative benefit may be announced as the process goes on.
