Though the government claims to have instilled stability in prices during the next financial year through a public friendly budget, the huge reduction in subsidy on electricity will cause a further price hike and inflation in the country.
With the estimated increase in tariff by around 12 per cent next year as a result of the reduction in subsidy, the cost of all commodity and production as well as transportation would be swelled . Subsequently, the rate of inflation would also surge to a level where the poverty hit masses could not afford the basic facilities of life, experts said.
As the has shown its intention to raise the electricity tariff while reducing the tariff differential subsidy by Rs50 billion in 2011-12 against the revised estimates of Rs 238 billion in the outgoing financial year 2010-11, the huge difference in tariff would affect every sector.
Speaking to Pakistan Today, Saeed Shafeeq, President Karachi Chamber of Commerce and Industry (KCCI) said that the reduction of subsidy by Rs 27 billion to Karachi Electric Supply Company (KESC) from around Rs 48 billion would increase the power tariff.
The increase in power tariff by Rs14 per unit would drastically increase the cost of doing business and commodity prices, he said adding as the company would pass on the amount to the consumers, the people as the ultimate sufferers would be paying for that.
Under immense pressure from multilateral creditors, including the International Monitory Fund (IMF), World Bank (WB) and Asian Development Bank (ADB), the government is going to slash the power sector subsidy by over 60 per cent. The allocation for this sector was envisaged at Rs122.7 billion in 2011-12 against the revised estimates of Rs295 billion for the fiscal year ending on June 30, 2011.
Though the IMF and WB wanted to impose the required tariff while eliminating all subsidies given to the power supplying companies, the government has decided to pass on the tariff differentials to the consumers in phases and as per the government’s plans almost 8 to 15 percent increased is likely to be made in the forthcoming financial year.
According to sources the government has allocated Rs55 billion for power tariff differential subsidy in the budget while the remaining difference in the cost of the electricity worth Rs100 to Rs 140 billion would be adjusted through increasing the tariff and minimizing the line losses which has been recorded between 10 to 30 percent.
According to sources, though the government claims to focus on the targeted subsidies, as under the present form of the subsidy, there was not class difference, giving same subsidy to everyone consuming the electricity, the impacts on the cost of products, transportation and price hike would ultimately affect the poor.
While the country continues going through the hours’ long power outages and there is remedy for their sufferings, they would continue receiving the bills with enhanced amount of tariff next year without any sigh of relief.
According to the Annual Plan 2011-12 released recently, the Planning Commission (PC) has warned that the peak demand for power will rise to about 21,000 MW (Megawatts) per day against additional supply of 2,110 MW in the next fiscal year.
