Following an electric shock earlier in the day. The federal government launched a gasoline bomb on the country on Wednesday. To meet the terms imposed by the International Monetary Fund (IMF). For the renewal of a stalled loan program. Inked with the global lender during the previous PTI regime.
The federal government has decided to increase the prices of all petroleum products by Rs30. except one, a week after making a similar increase. Just hours after the National Electric Power Regulatory Authority (Nepra) approved a massive increase. In the power tariff of Rs7.91 per unit.
The new fuel rates have taken effect from midnight and new rates are Rs209.86 per liter for petrol. Rs204.15 for high-speed diesel (HSD), Rs181.94 for kerosene oil, and Rs178.31 for light diesel oil. Only kerosene oil's price was raised by less than Rs30. The price of a unit is likely to rise from Rs16.91 to Rs24.82 as a result of the latest increase in the power tariff.
Despite inevitable price increases that would unleash a strong wave of inflation. The coalition government is still far from reaching an agreement with the International Monetary Fund. Which requires a budget agreement for the fiscal year 2022-23.
However, Finance Minister Miftah Ismail has refused to guarantee. That gas and energy subsidies for the wealthiest citizens. As well as fuel allowances for cabinet members, judges, generals, and bureaucrats will be withdrawn.
Finance Minister Miftah Ismail told a news conference in Islamabad. That the government was still losing roughly Rs9 in petrol after an Rs30 raise because it was "not collecting any tax" on the fuel. The minister went on to say that the government met with the IMF every day. Although we cannot rely on all their requests still we have to follow some of them. He insisted that the petroleum subsidy announced by former Prime Minister Imran Khan. Had to be reconsidered to avoid financial losses.
Regardless of what the IMF says, the government will not be able to sell gasoline and diesel at a loss." Miftah, on the other hand, stated that the government would keep sugar and wheat prices stable. At Rs70 per kg and Rs40 per kg, respectively, in utility stores across the country. The minister went on to say that the government was happy to import oil from Russia. As long as sanctions were not imposed.
The hike in electricity tariffs was prompted by rising fuel prices. Capacity cost payments, and the rupee's depreciation versus the US dollar. The base cost has increased to Rs24.82/kWh, which is Rs7.9078/kWh higher. Then the previous national average tariff of Rs16.91/kWh. Set by the power regulator for the current financial year. For power users, this is the highest average tariff rate.
Due to extended disruptions, the electricity industry has spiraled out of control. Since the PML-N-led coalition government took office. The latest hike in fuel and energy prices will exacerbate people's misery. Who is already suffering from rampant inflation?
Increase in inflation
According to experts, raising fuel prices and tariff rates will result in a new round of inflation in Pakistan. Since it will raise the cost of doing business in the country. All product prices in Pakistan will rise as a result of higher gasoline and energy expenses. The rise has been forwarded to the federal government for notification. These increased rates will be followed by the consumers and tariffs after being released by the government. A notification is given to increase the prices and apply new rates on electricity and petrol.
Miftah indicated at the news conference that the administration had not yet determined whether to raise the power tariff.
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) filed multi-year tariff petitions. For the fiscal years 2020-21 to 2024-25, according to a Nepra statement.
In addition, the Islamabad Electric Supply Company (IESCO), and the Lahore Electric Supply Company (LESCO). And the Faisalabad Electric Supply Company (FESCO) filed an annual adjustment. Or indexation petitions under the multi-year tariff that had already been approved.
The overall benefit from the rise is expected to be Rs1.15 trillion, according to the power regulator. It also forecasted Rs1.36 trillion in capacity charges. Including the National Transmission & Despatch Company (NTDC) and high-voltage direct current (HVDC) costs.
With forecast sales of 113,001 GWh, the entire revenue need of XWDISCOs. Including DISCOs margin and prior year adjustment, is estimated to be Rs2.80 trillion. MEPCO, GEPCO, HESCO, SEPCO, QESCO, PESCO, and TESCO were also given Rs406 billion. To spend on their distribution investment program over five years, according to Nepra.
However, during FY 2022-23, the power regulator cut XWDISCOs and let T&D losses drop from 13.46 percent to 11.70 percent.