Muhammad Mudassar

An energy expert has asked the government to change the electricity tariff mechanism and go for flat rates for all sectors of the economy, including the residential sector, to help curb power theft, generate more revenues, and contain the circular debt.

Talking to WealthPK, Mansoor Ahmed, said different countries had applied the flat or linear tariffs. He said there were flat rates for each sector of the economy in many European countries as well. “In Turkey, all sectors are governed by the same flat rate.”

Ahmed, who is also a member of the Karachi Chamber of Commerce and Industry, suggested the government should change the tariff mechanism and go for flat tariffs, as by doing so people would become more inclined to pay their electricity bills, resulting in an increase in tax revenues and a reduction in circular debt.

Slabs are eliminated under the flat rate system, which means the per unit price does not increase when a consumer shifts from a lower slab to a higher one on the basis of an increase in units consumed. The same rate is applied to all consumers in a particular sector. The minimum per unit price is calculated to be a little over the actual cost of production, so there is no case for subsidies.

This mechanism will help improve the revenue of the power sector. In the residential sector, a significant number of consumers pay electricity rates, that are lower than the actual cost of electricity.

According to Mansoor Ahmed, a flat rate was a simple mechanism, under which a consumer’s per unit price would remain unchanged no matter how many units he had consumed. He said when the price of electricity was increased by Rs1 per unit, the circular debt increased by Rs10 billion as this encouraged power theft because people’s ability to pay inflated power bills was severely eroded, forcing them to use electricity through unfair means.

The energy expert said the surge in electricity prices also forced the upper classes to switch to solar energy. Moreover, he said some consumers got installed more than one meter to stay in the lower slabs, which offered relatively cheap rates.

It is important to mention here that in terms of electricity consumption, the residential sector consumes the most electricity, accounting for 47% of the total followed by the industry (28%), agriculture (9%), commercial sector (7%) and public lighting, general services and other government traction (8%).

Pakistan’s residential sector contributes the most to power losses in the country. The major reason for these losses is a large number of slabs for consumers. There are five slabs for residential consumers, and many consumers pay less than the actual cost of the electricity.

Pakistan may adopt any electricity transmission and distribution model, but the tariff structure needs to be improved. The minimum price per unit of electricity must not be less than the actual per unit cost of electricity.

Credit : Independent News Pakistan-WealthPk