Latest news with #TariffDifferentialSubsidy
Business Recorder
23-05-2025
- Business
- Business Recorder
Power generation rises — but at what cost?
Finally, there is some surge in power generation (read: consumption). It increased by 22 percent year-on-year in April 2024 to reach 10,513 GWh, almost matching the reference generation level. Multiple factors are contributing to this increase. One reason is the reduction in the power tariff for the April–June period, which is encouraging higher consumption from the grid. Another factor is the shift of captive power consumers to the grid, as gas has become prohibitively expensive for them. The third contributor is higher-than-usual temperatures in April, which drove up air-conditioning demand. However, the increase in generation is primarily from expensive imported sources. RLNG-based generation rose by 10 percent year-on-year and was 42 percent higher than the reference generation. Imported coal-based generation jumped to 1,054 GWh from almost zero in April last year—115 percent higher than the reference. In contrast, cheaper indigenous sources saw a decline. Nuclear power generation fell by 8 percent year-on-year and was 22 percent below the reference, while hydropower increased by 11 percent year-on-year but still lagged 29 percent behind the reference level. As a result, the Fuel Cost Adjustment (FCA) turned positive in April 2025 for the first time in nine months, rising by Rs1.27 per unit to Rs8.95 per unit. The key questions now are: How sustainable is this increase in power generation? And why is the generation mix skewed toward more expensive sources? The power tariff reduction includes components that are expected to continue into the next fiscal year. One such component is the Tariff Differential Subsidy (TDS), which may persist due to higher petroleum levies. Another is the Quarterly Tariff Adjustments (QTA), including concessions from IPPs, which are likely to be incorporated into the next year's base tariff. Overall, the reduction in tariffs is expected to persist and should continue to incentivize higher grid-based consumption. This trend is also prompting captive power users to transition to the grid. Captive plants used 110,000 bbtu of gas annually; at 40 percent efficiency, that equates to 12,907 GWh. If 50 percent of that demand shifts to the grid, it could increase monthly consumption by around 500 GWh. This appears to be happening and may continue. Household consumption is closely tied to weather patterns. The national average temperature in April 2025 was 27.9°C—significantly higher than the long-term average of 24.5°C—ranking as the second highest April temperature in 65 years. There may be fluctuations in air-conditioning demand in the coming months depending on weather variations, though temperatures in May 2025 have continued to rise. Industrial demand, on the other hand, is expected to remain elevated through FY26. As for the second question—why the merit order was distorted and why increased generation came from costlier fuels—sources indicate that nuclear generation in the south was constrained due to technical issues and was replaced by imported coal. In the north, lower hydel generation—caused by reduced water availability—was partially offset by increased reliance on RLNG. Furthermore, excessive RLNG usage may be linked to surplus volumes of must-import RLNG, as captive consumers have begun shifting away from it. Hydel generation is likely to remain weak this season, while RLNG consumption may stay elevated. This will continue to exert upward pressure on FCA, potentially offsetting the benefit from lower QTA and TDS. Copyright Business Recorder, 2025
Business Recorder
14-05-2025
- Business
- Business Recorder
Targeted power subsidies under BISP: Roadmap submitted to IMF, World Bank
ISLAMABAD: The government has reportedly submitted a roadmap to the International Monetary Fund (IMF) and the World Bank to extend targeted power subsidies to beneficiaries of the Benazir Income Support Programme (BISP), well-informed sources told Business Recorder. The move is part of a broader energy sector reform aimed at reducing inefficient consumption, curbing losses, and supporting Pakistan's climate mitigation goals. The current subsidy structure—characterized by blanket tariff differentials and cross-subsidies—has led to overconsumption and has often benefited wealthier consumers, undermining the sector's financial viability. The design has jointly been prepared by a Committee headed by PASS Division and issues and bottlenecks removed. Direct subsidy reform is also part of the RSF program of the IMF as a major reform measure. IMF assured: Power, gas subsidies will be aligned with BISP Accordingly, after a series of meetings between Power, BISP and the Finance Division and with the support of World Bank, a draft road map was prepared and shared with the IMF during recent meetings. As per the new timelines agreed with IMF identification and verification of eligible consumers to be completed by December 31, and June 2026, the government has to finalize the criteria and from FY 2027 budget there shall be no Tariff Differential Subsidy (TDS) but the allocation will be for direct subsidy to only eligible consumers and final timeline to shift on this roadmap is January 2027. The sources said Minister for Power has taken the first review of roadmap and has directed Power Planning and Management Company (PPMC) to evaluate impact on consumers which is expected by mid-May 2025 followed by the plan to be presented to the Prime Minister after which Cabinet approval shall be initiated, expected by mid-June 2025. The sources further stated that the government has assured the IMF that electricity and gas subsidies will be aligned with the BISP to ensure that only low-income households benefit from the relief, sources in the Finance Ministry revealed. A similar approach is under consideration for gas subsidies, with an assessment due by June 2026 to determine feasibility. Additionally, to boost energy efficiency, Pakistan will enforce Minimum Energy Performance Standards (MEPS) for appliances such as fans, LEDs, refrigerators, ACs, and motors by June 2027. New procurement regulations mandating MEPS compliance at federal and provincial levels will be introduced by December 2025. The National Energy Efficiency and Conservation Authority (NEECA) will begin quarterly reporting on MEPS adoption starting December 2025. Copyright Business Recorder, 2025
Business Recorder
14-05-2025
- Business
- Business Recorder
Targeted power subsidies under BISP: Roadmap submitted to IMF and World Bank
ISLAMABAD: The government has reportedly submitted a roadmap to the International Monetary Fund (IMF) and the World Bank to extend targeted power subsidies to beneficiaries of the Benazir Income Support Programme (BISP), well-informed sources told Business Recorder. The move is part of a broader energy sector reform aimed at reducing inefficient consumption, curbing losses, and supporting Pakistan's climate mitigation goals. The current subsidy structure—characterized by blanket tariff differentials and cross-subsidies—has led to overconsumption and has often benefited wealthier consumers, undermining the sector's financial viability. The design has jointly been prepared by a Committee headed by PASS Division and issues and bottlenecks removed. Direct subsidy reform is also part of the RSF program of the IMF as a major reform measure. IMF assured: Power, gas subsidies will be aligned with BISP Accordingly, after a series of meetings between Power, BISP and the Finance Division and with the support of World Bank, a draft road map was prepared and shared with the IMF during recent meetings. As per the new timelines agreed with IMF identification and verification of eligible consumers to be completed by December 31, and June 2026, the government has to finalize the criteria and from FY 2027 budget there shall be no Tariff Differential Subsidy (TDS) but the allocation will be for direct subsidy to only eligible consumers and final timeline to shift on this roadmap is January 2027. The sources said Minister for Power has taken the first review of roadmap and has directed Power Planning and Management Company (PPMC) to evaluate impact on consumers which is expected by mid-May 2025 followed by the plan to be presented to the Prime Minister after which Cabinet approval shall be initiated, expected by mid-June 2025. The sources further stated that the government has assured the IMF that electricity and gas subsidies will be aligned with the BISP to ensure that only low-income households benefit from the relief, sources in the Finance Ministry revealed. A similar approach is under consideration for gas subsidies, with an assessment due by June 2026 to determine feasibility. Additionally, to boost energy efficiency, Pakistan will enforce Minimum Energy Performance Standards (MEPS) for appliances such as fans, LEDs, refrigerators, ACs, and motors by June 2027. New procurement regulations mandating MEPS compliance at federal and provincial levels will be introduced by December 2025. The National Energy Efficiency and Conservation Authority (NEECA) will begin quarterly reporting on MEPS adoption starting December 2025. Copyright Business Recorder, 2025
