Govt Approves Imposition of Additional Surcharge on Electricity to Meet IMF Condition

The Federal Government, under the direction of the International Monetary Fund (IMF), has approved the imposition of an additional surcharge of Rs. 3.82 per unit on electricity for a four-month period from March 2023 to June 2023.

The Economic Coordination Committee (ECC) of the Cabinet under the chair of Finance minister Ishaq Dar approved the imposition of an additional surcharge of Rs. 3.39/unit (total surcharge became Rs. 3.82/unit) for four months.

Further, the ECC also approved an additional Rs. 1 per unit for FY 2023-24 (total surcharge for FY24 becomes Rs 1.43/unit) for the consumer categories to cover the markup charges of PHL loans not covered through the already applicable FC surcharge @ 0.43/unit.

The decision was duly ratified by the Cabinet vide Case No. 98/Rule-19/2023 dated February 14, 2023.

The above-mentioned surcharge of Rs 1.43/unit is expected to yield Rs. 126 billion for FY 2023-24 which is not sufficient to meet the power producers’ liabilities.

These liabilities are essentially an obligation of the Federal Government with respect to payment of electricity services having nexus with the sovereign guarantees.

Non-payment to power producers may result in a loss of generation capacity which can lead to an increase in load shedding.

Further, since the payments to the power producers have been secured by a sovereign guarantee issued by the Government of Pakistan (GoP), the power producers shall start calling upon the sovereign guarantees along with the imposition of a late payment surcharge.

Section 31(8) of the Regulation of Generation, Transmission and Distribution of Electric Power Act, 1997 (the Act) empowers the Federal Government to collect surcharges from the consumers for the fulfillment of any financial obligation of the Federal Government with respect to electric power services, within the bracket of ten percent of the aggregate revenue requirement of all-electric, power suppliers.

Accordingly, it is proposed that the amount of surcharge may be enhanced to Rs. 335 billion (against an already approved number of Rs. 126 billion) for FY 2023-24 and onwards for the consumer categories mentioned till the elimination of Federal Government obligations.

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