Electricity tariff Households pay almost same rate as industry

Posted on June 14, 2011. Filed under: Wapda / KESC |

KARACHI, June 13: This could be surprising for many yet it is a fact that ordinary citizens, in stress owing to severe load-shedding, are paying a high cost of electricity as industry that is also higher than the rate agriculture sector pays.

The calculation carried out on the basis of overall prices paid by the different segments of economy, including residential consumers across the country, shows that industry enjoys subsidies like the general public but enjoys priority in supply over households and, therefore, is not as severely hit by load- shedding.

The common residential consumers are paying Rs7 per Kwh, while the industry on average pays Rs7.2 per Kwh. The agriculture sector, however, pays Rs6 per Kwh for using power for tube wells.

While the people have been crying over high electricity tariff and ever-increasing load- shedding, particularly in summer, the government is expected to further increase the tariff by 25 to 30 per cent during the next fiscal.

The government had allocated Rs74 billion for subsidy on electricity, while it provided Rs285 billon during FY 11.

This massive decline in subsidy is expected to hike prices mostly for household consumers as they are the biggest user of electricity.

For next year electricity subsidy is budgeted at Rs74 billion, including Rs50 billion for Wapda generation, while Rs24 billion for KESC.

“We believe actual subsidy in FY12 would remain higher at Rs150 billion unless international oil prices sharply reduce. Moreover, given rising electricity shortage we believe that tariff hike this time would be rationalised,” said Farhan Mahmood, researcher at Topline Securities.

Analysts believe that two per cent per month tariff increase could be introduced from next fiscal but they said the political cost of this increase could be much more than expected.

Since the largest consumers of electricity are the general people, they would pay most of the cost of price hike.

Farhan said that against the average selling rate of approximately Rs7.5 per Kwh, residential customers, who consume 45 per cent of the country’s electricity, are on average paying Rs7 per kwh.

Though no major steps were announced to arrest electricity shortage in the new budget the government looked serious to curtail its burgeoning subsidies on electricity next year in line with IMF directives, he said.



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