The federal government on Wednesday dropped a fuel bomb on the nation after it suffered an electric shock earlier in the day – to meet the conditions imposed by the International Monetary Fund (IMF) for the revival of the stalled loan programme signed with the global lender during the previous PTI regime.
The federal government has decided to raise the prices of all petroleum products with the exception of one by another Rs30, just a week after making a similar increase – hours after the National Electric Power Regulatory Authority (Nepra) approved a massive increase of Rs7.91 per unit in the power tariff.
The new fuel prices will come into effect from midnight – petrol will be available at Rs209.86 per litre, high-speed diesel (HSD) at Rs204.15, kerosene oil at Rs181.94 and light diesel oil at Rs178.31. Only the price of kerosene oil was increased by less than Rs30.
With the new hike in the power tariff, the price of a unit is expected to move upwards from Rs16.91 to Rs24.82.
Despite an inevitable increase in the prices that will unleash a strong wave of inflation, the coalition government remains short of clinching a deal with the International Monetary Fund that still requires an agreement on the budget for fiscal year 2022-23.
But Finance Minister Miftah Ismail did not give a surety to withdraw gas and electricity subsidies accorded to the richest people and fuel allowances of cabinet members, judges, generals and bureaucrats.
Addressing a news conference in Islamabad, Finance Minister Miftah Ismail said the government was still facing a loss of around Rs9 in petrol despite a hike of Rs30 as it was “not collecting any tax” on the fuel.
The minister added that the government was holding talks with the IMF every day. “We cannot accept all their demands but there are certain points that we have to agree to.”
He maintained that the subsidy on petroleum products announced by ex-premier Imran Khan had to be withdrawn to avert financial losses.
“Irrespective of what the IMF says, the government cannot sell petrol and diesel by bearing losses.”
However, Miftah said the government would ensure stability in prices of sugar and wheat at Rs70 per kg and Rs40 per kg respectively at utility stores across the country.
The minister added that the government was willing to import oil from Russia, provided it did not come with sanctions.
Nepra has increased the electricity rates mainly on account of fuel prices, capacity cost payments and the impact of rupee devaluation against the US dollar.
The base tariff has gone up to Rs24.82/kWh — higher by Rs.7.9078/kWh than the earlier determined national average tariff of Rs16.91/kWh — determined by the power regulator for the ongoing financial year.
This is the highest average tariff rate for power consumers.
After the PML-N-led coalition government came into power, the electricity sector has spiralled out of control because of prolonged outages.
The recent increase in fuel and electricity rates will add to the miseries of the people, who are already feeling the heat of runaway inflation.
Experts say that increase in fuel prices and tariff rates would also bring about another flood of inflation in Pakistan as it would increase the cost of doing business in the country.
Due to higher fuel and energy costs, the prices of all products in Pakistan will further rise.
Nepra has sent the hike to the federal government for issuance of notification. The new tariffs will be applicable after the final notification from the government, according to a statement.
“The tariff once notified is then charged to the consumers,” it added.
However, at the new conference, Miftah said the government had not decided to increase the power tariff as yet.
As per the Nepra statement, the Multan Electric Power Company (MEPCO), Gujranwala Electric Power Company (GEPCO), Hyderabad Electric Supply Company (HESCO), Sukkur Electric Power Company (SEPCO), Quetta Electric Supply Company (QESCO), Peshawar Electric Power Company (PESCO) and Tribal Electric Supply Company (TESCO) had filed multi-year tariff petitions for the FY 2020-21 to FY 2024-25.
Also, the Islamabad Electric Supply Company (IESCO), Lahore Electric Supply Company (LESCO) and Faisalabad Electric Supply Company (FESCO) had filed annual adjustment or indexation requests under the already allowed multi-year tariff.
The power regulator has projected the total profit from the hike at Rs1.15 trillion. It has also projected capacity charges including National Transmission & Despatch Company (NTDC) and high-voltage direct current (HVDC) cost at Rs1.36 trillion.
The total revenue requirement of XWDISCOs including DISCOs margin and prior year adjustment is projected at Rs2.80 trillion with projected sales of 113,001 GWh.
Nepra further said that MEPCO, GEPCO, HESCO, SEPCO, QESCO, PESCO & TESCO had been allowed an investment of around Rs406 billion for their distribution investment programme for the five-year period.
However, the power regulator had reduced XWDISCOs and allowed T&D losses from 13.46% to 11.70% for the FY 2022-23.
(With input from our News Desk in Karachi)