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Power tariff hike

The process of solely relying on jacking up power tariff continues in the new government, ignoring urgent reforms by exploiting renewable energy sources, reviewing the private sector thermal agreements and recovery of bills from chronic and habitual defaulters. The finance Minster had admitted in a TV talk show that high electricity and gas tariffs are harming the manufacturing sector by affecting its competitiveness.

The power division and National Electric Power Regulatory Authority NEPRA) have projected a misleading scenario largely blaming the accumulation of circular debt on line losses of transmission and distribution system, while not telling the truth about the disastrous power sector agreements and a default on bills of Rs. 850 billion by the influential political and business elite and government departments.

NEPRA has notified yet another increase of 36 paisa per unit in fuel adjustment charges. This is the third increase over the past few months and the cumulative upward revision in power tariff after adding taxes and surcharges has reached to Rs. 4 per unit. The price of crude oil has dropped by $ 8 per barrel in the international market and there is no justification in the recent power tariff increase.

While the new government has inherited a massive circular debt of over Rs. 1 trillion in the energy sector, the power sector regulator has increased its woes by reporting that transmission and distribution companies have continued to fail in controlling line losses which is portrayed the major cause of circular debt and not telling the truth about shady deals made with private power producers. It is the capacity clause incorporated in these agreements that government is bound to pay 40 percent amount of circular debt for the idle plant capacity of private thermal power plants. Likewise, the non-payment of electricity bills worth Rs. 850 billion has also contributed to the burden of circular debt. To understand the actual grim picture, the Prime Minister Imran Khan and Finance Minister Asad Umar need a briefing from the Pakistan Business Council and independent e economists to effectively address the issue of circular debt.

The national exchequer has suffered a loss of Rs. 111 billion on account of line losses and non recovery of monthly electricity bills from the influential defaulters up to 100 percent. According to NEPRA such losses are playing primary role in creation of circular debt but ignore the debt trap laid by the private power producers taking illegal advantage of the capacity clause envisaged in the agreements made with them. It has published annual evaluation report on a date the Economic Coordination Committee (ECC) of the Cabinet said it has identified five to six key areas that account for the piling debt, currently standing at Rs. 1.19 trillion.

Losses to the national exchequer and addition of debt could be higher than the one reported for the year under review as the regulator over a dozens times has shown mistrust on the accuracy of the data the transmission and distribution companies have submitted. NEPRA, however, used the “fudged” data to calculate the losses and evaluate the performance in other categories like bills recovery. Giving the break up of 111 rupees debt, the regulator reported the line losses stood at Rs. 35 billion while non- recovery of revenue accounted for Rs. 76billion in the year. It also reported that all the 10 distribution companies have recovered up to 26 percent line losses from the consumers who regularly pay their monthly bills. The injustice meted out to them is allowed in raising power tariff. This practice of victimizing the honest consumers has made the payment of electricity bills unaffordable and they are compelled to go for installing solar energy systems for domestic use.

Another method of high handedness applied against the honest consumers is the frequent increase in gas tariffs and at the same time refraining from strict action against the defaulter of million of rupees. The ECC treaded carefully and deferred the decision on the summary for increase in gas tariff. Headed by the finance minster, the ECC did not take up the summary for gas price rise up to 180 percent.

The PTI government is aiming to seek solutions to the issues that have caused building up of a whopping Rs. 1.22 trillion circular debt. Theri is dire need to reactivate the “federal adjuster” in the finance ministry to recover receivables of electricity bills from provincial governments, initiating strict action against defaulters and renegotiating the power sector agreements.

 

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