WB seeks timeframe for power tariff hike

Protestors burn their KESC bills to demonstrate against a price increase in early 2008 — File photo.

ISLAMABAD: While expressing its reservations over the delay in removing electricity subsidies, the World Bank Mission has suggested the government divert gas supplies from the CNG sector to power generation to reduce energy cost.

The WB Mission headed by Ms Sato held a meeting with Pakistani officials led by State Minister of Finance Hina Rabbani Khar here on Tuesday and tried to finalise the mode and the time-fame for enhancing electricity tariff.

Officials who participated in the meeting told Dawn that the World Bank wanted to end the power subsidies within six months, but the government officials suggested a tariff raise from the second quarter and complete the process by the last quarter of 2009-10.

The two sides also discussed raising power tariffs by five per cent from October 2009 and by another 10 per cent from January 2010.

‘The accumulated impact of these two raises would be over 17 per cent,’ said an official of the finance ministry.

He added that it was also suggested to further push up power tariffs by five per cent from April 2010 if furnace oil prices go up during the winter months of December to February.

The meeting also discussed an option of shifting 150 mmcfd gas from the CNG sector to power generation that could bring down electricity generation cost to affordable limits.

‘We have to find a solution to end energy crisis,’ Ms Hina said. Sources said that the WB took serious note of continuous delay in ending the power tariff that was causing fiscal imbalance and wanted the government to take some concrete steps.

‘The negotiations focused on various options and formulae for ending subsidies on electricity,’ said Secretary Finance Salman Siddique, adding that the final decision would be reached on Wednesday.

He said that the IMF had allowed Pakistan a six-month extension for ending electricity subsidies, which was originally scheduled from the start of 2009-10.

‘The IMF has allowed that the impact of Rs60 billion in subsidies may be covered from other government development expenditures,’ said the finance secretary, adding that the cuts in the PSDP would be figured out later.

The negotiations with the World Bank Mission are crucial as the release of $850 million IMF tranche is linked with the time-frame for removal of power subsidies, said the officials said.