THURSDAY JANUARY 06: Power sector: reforms not being shared with Finance Ministry

ISLAMABAD: The much talked about power sector reforms, initiated by the Ministry of Water and Power under the guidance of Deputy Chairman of Planning Commission and international financial institutions, are not being shared with the Finance Ministry, official sources told Business Recorder.
"Power sector reforms have never been shared with the Ministry of Finance, in writing or through official channels, nor the Ministry (CF Wing) is aware of such commitment at any level," sources quoted Shabbir Ahmed, Joint Secretary (Corporate Finance), as saying in a letter to the Deputy Chairman of Planning Commission, Dr Nadeem-ul-Haq. Replying to a letter written by the Ministry of Water and Power's Energy Advisor, Shahid Sattar, who, according to Ministry's own officials, is not known as a power sector expert, the Finance Ministry stated that the claim on account of arrears of tariff differential subsidy is not based on facts.
According to Finance Ministry, the government picked up all arrears on account of tariff differential for the period 2004-05 to 2008-09 by taking on the liabilities of Rs 216 billion. Additional amount of Rs 85 billion was also arranged in September, 2009. It may be pointed out that, as of June 30, 2006, such unpaid claims were Rs 39 billion.
For the year 2009-10, Pepco's projected revenue gap was Rs 110 billion and in a meeting held in May and then on 14-15 July, 2009 when the delegations of ADB and World Bank were also present, a consensus plan to bridge the gap was agreed by all including M/oW&P and Pepco. The plan was as follows: (i) Pepco to face revenue gap of Rs 110 billion in the year 2009-10 - the figure for such gap was changed to Rs 132 million in a meeting held on February 27, 2010; (ii) government will provide cash subsidy of Rs 55 billion; (iii) tariff will be increase to create further resources of Rs 55 billion; and (iv) there will be no tariff differential subsidy during 2010-11.
It was agreed that tariff will be increased by 6+12+6 in three quarters on October 1, January 1 and April 1, 2010. Sources said that the Ministry of Finance not only honoured the agreed commitment but it also released Rs 38 billion over and above the commitment during the year 2009-10. Moreover, despite the commitment with donors that no tariff subsidy would be provided during 2010-11, the Ministry of Finance allocated an amount of Rs 30 billion against which M/o Water & Power released an amount of Rs 32 billion as tariff differential.
Finance Ministry also released additional amount of Rs 30 billion as interest-free loan to Pepco in November, 2010, sources added. "It is clear that Ministry of Finance has already released much more than committed," sources said. They said that Ministry of Water and Power has been requested to share minutes of the meeting where such commitment was made to process the case further. MoF argues that such matters should be resolved at inter-ministerial level, rather than through communicating an incorrect position.
Finance Ministry has also urged the Ministry of Water & Power to direct Pepco to improve its efficiency as due to its poor performance neither the line losses have been lowered nor situation relating to receivable/recoverable from private as well as public sector consumers has improved.
The receivable from private sector consumers have jumped from Rs 78 billion to Rs 103 billion and to Rs 122 billion during the period from June 30, 2009 to June 30, 2010 to October 31, 2010 respectively. "Pepco may also be directed to share the special audit report which was mandatory to offset arrears of unpaid tariff differential subsidy in terms of Finance Division's u.o.No F.1(41)-CF-I/2009 dated June 10, 2009," sources quoted Joint Secretary, Corporate Finance as saying in his letter.