Karachi consumers will inevitably have to accept the increase so that the tariff can be brought at par with the rest of the country, as per the uniform tariff policy

Lately there has been tremendous hue and cry emanating from Karachi over the expected notification for an increase in the electricity tariff. In December 2019, the National Electric Power Regulatory Authority (NEPRA) approved a PKR 4.88 increase in the tariff for Karachi consumers to account for unclaimed fuel price variations, power purchase cost and other adjustments. While this is yet to be implemented – the people of Karachi have been up in arms, alleging that that they pay more for electricity than the rest of the country. Nothing could be further from the truth.

Karachi consumers have been paying less per unit of electricity than the rest of the country since July 2019. K-Electric’s tariff was delayed since 2016 and was finally notified in May 2019, which became a major cause for delays in the said adjustments. According to media reports, the PKR 4.87 increase could be broken up into two parts, by passing on the tariff increase of PKR 1.09 to PKR 2.89 per unit to consumers in different categories to bring the KE tariff at par with other power distribution companies, and the remaining to be taken up in tariff differential claim or prospective tariff adjustment.

While Karachi’s tariff is still not at par with the rest of the DISCOs – for several reasons including the fear of political blow back, this is only a temporary reprieve and the failure to make these decisions in a timely manner means that now Karachi consumers will face a double whammy of a higher tariff and economic instability caused by COVOD-19, leading to a heightened chance of delinquencies and defaults. These decisions were not made in a timely manner and now the government is faced with a task that has become all the more difficult.

Senator Fida Muhammad, Chairman Senate Standing Committee on Power mentioned on the floor of the house that the simultaneous implementation of two tariff decisions would add a sudden burden to KE consumers and lead to ‘severe hue and cry’. And that is exactly what is happening. He also said that while the tariff determinations, might be legitimate on commercial and technical grounds but follies of a few people create hardships for all the stakeholders. It has already created hardships for the power utility, which has several times highlighted its cash flow challenges and increased dependence on bank borrowing to finance investments. This was also endorsed by the Additional Secretary, Power Division, Waseem Mukhtar who has said in the past that the delayed determination of quarterly adjustments for KE for such a long period had also adversely affected the company’s financial position.

Similarly, Senator Shibli Faraz has also in the past said that tariff determinations should be final and that when previous governments had frozen electricity prices instead of implementing NEPRA decisions, it had resulted in huge backlog and losses to power companies and sudden burden to consumers, which was against the national interest.

Karachi consumers will inevitably have to accept the increase so that the tariff can be brought at par with the rest of the country, as per the uniform tariff policy. Meanwhile the delay is simply adding burden to the national exchequer in the form of Tariff Differential Claims. Moreover, the delay in the payment of fuel cost adjustment and other costs to KE is putting a strain on the utility’s ability to invest in the city’s power needs. Everyone is a loser in this situation and the sooner all stakeholders including the government and the people understand this, the better.

The author is an Islamabad-based researcher with keen interest in business and economy, and focus on energy sector developments. He can be reached at abid.saeed109@gmail.com.