Power Minister Awais Leghari has told the National Assembly Standing Committee on Energy in Islamabad on Wednesday that the government may reduce tariffs by upto Rs 12 per unit from the current high (for domestic consumers over 700 units) of Rs 65 per unit. This is the result of the process that started with renegotiating tariff agreements with Independent Power Producers. He also disclosed that the government had already cancelled projects for 10.000 MW of electricity, ands would cancel those of a further 17,000 MW, if they did not revise their tariff agreements. This implied that they would not be allowed the charge capacity payments, whereby they received capacity payments for production even if they did not generate a single unit, with fuel costs separately. Instead, the IPPs are being made to switch to a ‘produce and pay’ model.
Though there had been much activity, spearheaded by Mr Leghari, of the task force set up by the Prime Minister, with the IPPs, in which they had been subjected to close examination going back to the time they had been set up, tariffs have not gone down much, leaving the electorate feeling shortchanged. The government had even been shy of saying what sort of reduction it was looking at. It has also been sphinx-like in its silence on what it will do about the corruption that has been uncovered, but that is another story. Even now, Mr Leghari explained to the committee, the final reduction would be determined after the INMF signed off on the new gas tariff for the captive power plants. These CPPs, which are gas-fired, have been condemned as burdensome on the exchequer, and power plants set up by industry for itself means that they will not buy from the DISCOs. The government clearly wants to see what will be actual effect on power demand before making a final decision on tariffs.
Power tariffs are an important factor in solarization. The drastic reduction contemplated, though, my only act to slow its pace, not eliminate it. The fall in panel prices, which made their installation come within the reach of the ordinary consumer, is expected to continue. Then it may be that tariffs may not be kept down if world oil prices, over which the government has no control, go up. However, bringing down the tariff will not only benefit the domestic consumer, but also both industry and commerce, which, combined with the falling interest rate, lead to greater growth and more jobs being created for the burgeoning youth bulge.
