The National Electric Power Regulatory Authority (NEPRA) has approved the phase-I of the subsidy rationalization plan formulated by the Federal Government. It will be applicable all over the country including K-Electric.
The three-phased plan has already been agreed with the World Bank and the International Monetary Fund (IMF) and will facilitate the upcoming talks between IMF and the Federal Government regarding power tariff reforms.
According to details, the phase-I plan envisions the creation of four new tariff slabs and a slight expansion in the definition of lifeline consumers to 100 units per month for a gradual reduction of subsidies.
In phase-II and –III, the new slab mechanism would lead to the imposition of higher electricity rates in a gradual way or subsidy payments to deserving consumers through Ehsaas Cash Cards.
Under phase-I, the existing 301-700 unit slab has been divided into four slabs of 100 units each; 301-400, 401-500, 501-600, and 601-700 units. Each slab will continue to receive the previous slab benefit of the first 300 units.
At the moment, the existing tariff of the consumers falling in each of these slabs will remain unchanged. However, it will be adjusted once the Federal Government takes a policy decision for tariff adjustment.
Moreover, Non-Time of Use (ToU) consumers have been divided into two categories of “Protected” and “Unprotected” consumers.
The subsidy rationalization plan will be completely implemented in the next five years. Around 8 million power consumers will be removed from the subsidy regime over the next five years.
Currently, 99% of electricity consumers are entitled to various subsidies. For instance, the existing subsidy regime protects 84% consumption below 300 units representing 89% domestic power consumers.
After the implementation of the subsidy rationalization plan, the percentage of electricity consumers will be reduced to 43% and the subsidy will be paid in cash through Ehsaas Cash Cards to deserving consumers.