Amir Khan

Pakistan is set to disclose the intricate details of its electricity tariff, cross-subsidy dynamics in the industrial sector, and a comprehensive reduction strategy for the upcoming financial year (2024-25) to the International Monetary Fund (IMF) in the current month. Talking to WealthPK, Senior Advisor at Beacon Impex Private Limited Muhammad Shakeel Faridi said the industrial consumers currently were grappling with an additional burden of Rs473 billion annually due to cross-subsidy. He said this had propelled the industrial tariff to an unsustainable level of 14 cents per unit, making it the highest in the region. "The predominant factor contributing to this high tariff is cross-subsidy. A comparison across the region highlights the stark contrast: the industrial consumers in Vietnam pay 6 cents, India 8 cents, and Bangladesh 10 cents, whereas in Pakistan, the tariff ranges from 14 to 16 cents per unit, contingent on the exchange rate of the Pakistani rupee against the US dollar. "Notably, the cross-subsidy mechanism is employed by the government to extend subsidized tariffs to the lifeline consumers and those utilizing up to 200 units per month. The government's strategic plan is to reduce the current industrial tariff from 14 cents per unit to a more competitive 9 cents per unit, with a likelihood of implementation shortly," he highlighted.

Talking to WealthPK, Muhammad Aurangzeb, a member of the All Pakistan Textile Mills Association, said concerns loom over the potential consequences of reducing cross-subsidy on the industrial consumers, potentially amplifying the burden on the consumers utilizing 400 units and above per month. The government is actively devising a strategy to minimize the impact of cross-subsidy adjustments on these consumers. The IMF has specifically sought detailed information on cross-subsidy, necessitating a fresh plan submission after the previous proposal failed to secure the Fund's endorsement. Shedding light on the circular debt issue, Aurangzeb disclosed that the current circular debt stood at a staggering Rs2,700 billion, requiring substantial financing to cap it at Rs2,310 billion. In the ongoing fiscal year, the government anticipates a financing requirement of Rs976 billion. He concluded with remarks that plans were underway to transfer the management control of power distribution companies (Discos) to the private sector by the end of this year, marking a pivotal shift in the energy sector landscape.

INP: Credit: INP-WealthPk