National Power Regulatory Authority (NEPRA) has notified 48 paisa per unit increase in the electricity tariff for the August under the monthly fuel charges adjustment mechanism. It will be charged in the billing month of November from all categories of consumers of DISCOs across the country, except Karachi Electric Company. The tariff increase will put an additional burden of Rs.7 billion on power sector consumers. The trade bodies have demanded for its withdrawal.
Skewed priorities for thermal power generation from diesel and furnace oil and payment liability for idle plant capacity agreed under shady deals pushed the electricity tariff to highest level in the region. The exorbitant fuel price and the inflated price agreed in the power purchase agreement landed power sector in the trap of circular debt which is now well over Rs.2.15 trillion.
It is no longer a secret that major contributory factors of swelling power sector circular debt are the accumulating capacity payment arrears and indexation of IPPs electricity tariff with the US dollar, allowed by the previous government. What is mind’s boggling is that why the present government is not revealing the Nitti Gritty of power purchase agreements, the power policies approved by PPP and PML N governments? Why opinion of experts of Company Law and Law of Tort is not being obtained as to whether the agreements between government and local companies or foreign companies can be made for indefinite period and without the proviso of renegotiation? How long the country and its people will remain hostage to agreements which had been made for the protection of vested interest?
Power Division claims to have reduced the per month increase in circular debt accumulation to Rs.12 billion. On the contrary, NEPRA has accessed it over 30 billion. The swelling circular debt explains that assessment of regulator is correct. Expensive fossil fuel for thermal power generation, technical losses by the ragtag transmission and distribution system , theft and default of bills and accumulated outstanding dues of local IPPs for the past several years are the major contributory factors of fast piling of this debt, which power division had claimed to be clear by December 2020.
On August 14, Prime Minister congratulated the people in a tweet that government has signed MOUs with local private power producers and consequently under the new agreement the cost of electricity will be brought down and circular debt shall be substantially reduced. He also promised to introduce a package for improving the power distribution system to tackle the chronic issues of line losses and theft. On the contrary, top men in Power Division told a leading English Daily newspaper on 29th August that the benefit of Rs.40 billion estimated annual savings accrued after the revised power purchase agreement shall not be provided to end consumers. It may be recalled that Information Minister Senator Shibly Faraz, flanked by Prime Minister’s Special Assistant on Power Shazad Qasim, said in a press conference on August 16 that government has constituted a team to negotiate with IPPs to revisit the old agreements. The minister told that under the new agreements payment shall be made for electricity acquired and consumed instead of installed capacity of a particular power plant, adding that equity return shall be paid in rupee rather than US dollars, which was allowed by the last PML-N government. It merits mention here that power sector agreements made under the power generation policy of 1994 and 2015, clauses were inserted for 40 percent and 75 percent payment for idle plant capacity.
Special Assistant to the Prime Minister on Power made it clear that the accord with private power producers will be applicable after the clearance of dues of IPPs and two years are needed to frame new purchase regime. There is no visible progress towards the conversion of MOUs into formal agreements, whereas the MOUs will stand lapsed after six months, three months have already passed. Hopefully, government will realise that time is running out for negotiating and signing of new agreements to get regionally competitive power tariff regime.