Energizing Winter: Government's Blueprint for Affordable Electricity
As winter approaches, the government's "winter package" for the industrial sector promises to provide warmth and support. With collaborative efforts and innovative solutions, it aims to not only boost industrial growth but also navigate the complexities of the energy landscape. The path ahead holds promise and possibilities.
Karobar
The federal government is taking proactive steps to ensure a warm and productive winter for the industrial sector. A comprehensive four-month "winter package" is in the works, aiming to provide affordable electricity during the colder months. This initiative not only seeks to stimulate industrial growth but also relieve the burden of capacity payments for power plants. Here's what we know so far.
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The Winter Package Unveiled:
Reliable sources have shared details of this winter package with Business Recorder. Once approved by the federal cabinet and the International Monetary Fund (IMF), the benefits will extend nationwide, including to K-Electric's jurisdiction. This package is estimated to have a potential impact of around Rs 25 billion. But a pressing question remains: how will this cost be covered, considering the constraints imposed by the IMF and World Bank, which prohibit the government from adjusting this amount as a subsidy?
A Collaborative Effort:
To address these challenges, the Strategic Implementation and Facilitation Cell (SIFC) is coordinating efforts from key government divisions, including the Power Division, Finance Division, Commerce Division, and the Chairman of the Federal Board of Revenue (FBR). Together, they are working on a financial plan to introduce industrial tariffs based on the cost of service, a move aimed at tackling the issue of cross-subsidies for domestic users that undermine export competitiveness.
Reducing Costs and Boosting Efficiency:
To bring down the overall cost of electricity, the Secretaries of Power, Commerce, and Finance are devising a mechanism for implementing wheeling at the cost of just one cent per unit. Additionally, a committee will be formed to address capacity charges and debt restructuring within the power sector.
Charting the Course:
A meeting within the Power Division is scheduled to discuss the preliminary framework of the proposed winter package for industries. This gathering will also finalize the rate and duration of the incremental winter package before submitting a formal proposal to the Economic Coordination Committee (ECC) of the Cabinet.
Inclusion of Domestic Consumers:
Experts have suggested expanding the winter package to include domestic consumers. This would enable them to use electricity for heating, particularly during periods when gas availability is limited.
In 2020, the government introduced the "Use more Pay Less Package," offering a rate of Rs 11.97/KWh for incremental consumption between November 2019 and February 2020. This package led to a 16% growth in consumption among domestic, commercial, and industrial consumers of Distribution Companies (Discos).
Anticipated Growth:
According to the Power Division, the previous industrial support package resulted in a significant increase in electricity consumption, with growth rates soaring from 4.29% in November 2020 to over 18% in June 2021. Based on these trends, the Power Division anticipates a growth of over 25% for Discos and over 35% for the K-Electric system in 2023-24.
The Power Division notes a surplus of power during winter months, which can be efficiently utilized. Importantly, the winter package is expected to have a positive impact on the fiscal balance, as the excess electricity generated will be consumed during the four winter months.
No Load Management in Karachi:
Karachi Electric has assured that there will be no load management in its system due to the implementation of the industrial package. The additional demand will be met through its fleet and additional utilization from the national grid.
APTMA's Request:
In an interesting development, the All Pakistan Textile Mills Association (APTMA) Punjab has requested the government to allocate the entire electricity generated from the RLNG-fired Balloki power plant to its members or consider selling the plant to the association. Discussions are underway, and concerns have been raised about the Rs 7 per unit cross-subsidy and the challenges tied to recovering this amount from individual APTMA members.
