Nepra announces 20% increase in national tariff

The National Electric Power Regulatory Authority (Nepra) has recently revealed a significant development in the energy sector. Nepra has declared a nearly 20% increase in the uniform national tariff to secure approximately Rs3.8 trillion in funding for the 10 ex-Wapda electricity distribution companies (Discos) during the fiscal year 2024-25. This increase, amounting to Rs5.72 per unit, is scheduled to come into effect from July 1, providing an additional revenue of Rs485 billion to the Discos. The primary objective behind this move is to strengthen the government's position in obtaining an IMF bailout in July.

The average national base tariff, inclusive of K-Electric, has now been set at Rs35.50 per unit for the upcoming fiscal year, compared to Rs27.78 for the current year. This adjustment is estimated to generate around Rs3.763 trillion in revenue for the 10 Discos in 2024-25. After factoring in a general sales tax of 18%, the average base tariff for the next year is expected to rise to Rs42 per unit, excluding additional taxes, duties, and surcharges, which will impose an extra burden of approximately Rs580 billion on Discos' consumers.

Following approval from the federal cabinet, the power division will submit a revised tariff table to Nepra for subsidy allocation among various consumer categories before the official notification on July 1. Nepra's determinations also include the calculation of the average power purchase price for Discos, with capacity charges constituting around 65% of the total projected PPP for XWDISCOs in 2024-25.

The increase in the national tariff can be attributed to various factors such as currency devaluation, high inflation, elevated interest rates, capacity expansions, and sluggish sales growth. The revised average national tariff is anticipated to range between Rs65 and 72 per unit, inclusive of surcharges, taxes, duties, and adjustments, aligning with the IMF's conditions for structural reforms in the energy sector and state-owned enterprises governance.

Last year, a similar adjustment in the national uniform electricity tariff resulted in a Rs5 per unit increase, leading to a financial impact of Rs477 billion. This highlights the significance of tariff adjustments in ensuring the financial sustainability of the energy sector and meeting international obligations.

The increase in the national tariff by Nepra reflects the ongoing efforts to stabilize the energy sector and meet financial obligations. While consumers may face higher electricity costs, these adjustments are crucial for the long-term sustainability of the sector and compliance with international standards. It is essential for all stakeholders to work together towards a more efficient and reliable energy system for the benefit of the country's economy and its citizens.