Power Division is reportedly determined to charge quarterly tariff adjustment of Rs 21 billion (@ Rs 1.80 per unit) from zero rated industry, sources close to Minister for Power told Business Recorder. On October 24, 2018, the ECC approved summary on tariff rationalisation for power sector, subsequently, proposal for uniform tariff based on the consolidated revenue requirement was approved and determined by Nepra for Discos on December 19, 2018 which was duly notified by the Power Division on January 1, 2019 for Discos.
Power Division issued a separate notification for zero rated industrial consumers effective from January 1, 2019 at a fixed rate of 7.5 cents/ KWh. Later on it was also clarified to all Discos that Financial Cost (FC) surcharge , the Neelum Jhelum Surcharge, taxes and positive fuel adjustments will not be part of billing as discussed in the ECC meeting and would be part of subsidy claims to be picked up by GoP, subject to confirmation by the Finance Division.
Power Division, accordingly submitted the claims for the month of January-April 2019 through its subsidy cell of zero-rated industrial consumers to the Ministry of Finance which on June 29, 2019 replied” as per the ECC’s decision, zero-rated is being billed equivalent to 7.5cens/kWh and there is no direction whether to cross subsidize the differential or to be subsidized by GoP as subsidy which is estimated to be around Rs 23 billion annually. Similarly, clear direction from the ECC is also required on the taxes and surcharge as to whether these are exempt from recovery which have financial impact of Rs 4.5 billion per annum. Currently, no budgetary allocation is available for this subsidy during 2018-19. Further, Finance Division has transferred power sector subsidy to the Power Division for 2019-20 and stated that zero rated subsidy claims for the period January-April 2019 are returned with the request to Power Division to seek clear directions on this issue from the competent forum. i.e. ECC”.
Further proposal for uniform quarterly adjustments (1st and 2nd quarter) for FY2018-19 were approved by the ECC. The decision is as follows “to notify the Nepra quarterly adjustments after incorporating the targeted quarterly subsidy and additional charge so as to protect the lifeline consumer, domestic consumers consuming up to 300 units and partially protect the domestic consuming above 300 units including the domestic TOU category from price escalation.”
Power Division further stated that in order to protect the lifeline and domestic consumers consuming up to 300 MW per month and partially protect the domestic consumers consuming above 300 units including the domestic TOU category, approval was sought for the targeted tariff differential subsidy for first and second quarters to the tune of Rs 54 billion and additional charge of Rs 31 Paisa per unit for maintaining uniform tariff on all category of consumers except lifeline and all domestic and agriculture consumers, so that the consolidated revenue requirement pertaining to quarterly adjustments as approved and determined by Nepra is maintained.
The notification of these adjustments was made on July 1, 2019. Subsequent to the notification the zero-rated industries specially APTMA approached Power Division and asserted that quarterly adjustment charges are not applicable to them citing the notification and have gone to High Courts against the notification and got stays. Power Division argued that not charging quarterly adjustments to zero rated industries would have financial impact of about Rs 21 billion.
The Power Division has decided to take up this case with the ECC for the following decision: (i) quarterly adjustment notified on July 1,2019 will be applicable to zero rated industrial consumers and will be charged over and above the notified tariff for zero rated industrial sector i.e. @ 7.e cents/ kWh; and (ii) financial cost surcharge, Neelum Jhelum surcharge, taxes and positive adjustments will not be part of billing to zero rated industrial consumers and would be part of subsidy claims to be picked up by GoP.
(This news/article originally appeared in Business Recorder on September 10th, 2019)