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ISLAMABAD: Power sector's cost of service has increased as result of major economic decisions taken by GoP especially related to rupees devaluation, variation in KIBOR and variation in CPI, well informed sources told Business Recorder.

These variations not only effected the dollar indexed capacity cost to the tune of Rs 179 billion as well as also effected the prices of the imported primary fuel used for generating electricity to the tune of Rs 102 billion since 2018.

According to sources, another factor of the build-up was non passing on of the cost of NHP as the government took a principle stance that some cost built into the tariff not be immediately charged and deferred for the time being to reduce the impact on the end consumer of price hike, which include about Rs 146 billion of NHP.

"The consumers were not charged with an additional burden of Rs 46 billion of NHP and requested Nepra to stagger that impact," the sources added.

With the onset of the Covid-19 pandemic in late February 2020, power sector, like other sectors in the country was badly affected. The revenue and remittances, which were at the level of 92% stated sliding down and were recorded at 50-60%, the sale of electricity dropped to industries, the payment to power sector entities plunged. The result was that flow of circular debt increased beyond Rs 50 billion per month in March 2020 and beyond, resulting in missing the targets of circular debt capping plan. The same number before March 2020 was below Rs 20 billion.

The sources said the drop in sales cost about Rs 66 billion, the economic support packages created a cash shortfall of about Rs 100 billion. These facts were brought before CCoE and ECC during months of March through May 2020. Up till the month of February 2020 a recovery level of above 90% against all units billed was maintained, when Covid-19 pandemic set in and reduced the recovery levels to 40-50% in the next 3 months. This resulted in addition of 50 billion of flow on a monthly basis.

All in all, the impact due to non-decisions has resulted in build-up CD beyond Rs 400 billion.

A detailed plan mapping these components of CD was prepared. The Circular Debt Capping Plan was based on the assumption that regular quarterly adjustments, fuel price adjustments as well as budgeting and payment of subsidies would be in place.

The ultimate aim of the circular debt capping plan was a target of gradual reduction of the quarterly flow/increase of circular debt, reducing it less than Rs 8 billion per month by December 2020.

By December 2019, the flow of CD was Rs 13-17 billion per month as compared to Rs 30-35 billion in first two quarters of 2018, while netting off subsidies to be paid by GoP and the NHP effect. This reduction came from passing on stranded costs to the consumers and efficiency improvement like theft control in the power sector.

The inefficiency of the power sector contributes only a portion of the buildup of circular debt. The work done in two years from start of theft campaign showed results for sectoral improvement both in recovery and losses. The ATC index raised. The efforts at the operational level started in October 2018 when the anti-theft campaign started. The theme was to clean the system of theft and corruption and put in SoPs for future continuation of such actions. Basic SOP is application of law against all power thieves without any consideration of political affiliation, or social status and the second most important SOP was refusal to accept any political intervention in transfers and postings.

The third SOP of non-tolerance for corruption. Field operations were given complete administrative support and massive results were achieved through consistent support, monitoring, accountability and motivation. Individual feeders and areas were targeted and clearing operations started. Each area which was cleared was supplied with electricity without any revenue-based load management. To sustain the effort an aggressive daily drive against theft of electricity was ensured, with night-time vigilance to control theft during night. Open Katcahris were organized from August 2019 on weekly basis without any break, till the time Covid-19 pandemic hit.

A comparison has indicated that during a period of October 2017 to October 2018 only 11,949 FIR were registered against theft cases of 81,230 whereas during November 2018 to January 2020, a total of 141,403 cases were caught and 56,067 FIRs were registered, with about 8,736 arrests. The detections bills raised during the same periods resulted in more than Rs 3 billion recovery, the recovery which was less than 20% rose to 70% of detection bills.

Policy level interventions involved finalizing the RE policy with targets of RE in national grid and competitive bidding, Integrated Generation capacity expansion plan (IGCEP) to bring choices in the type of fuel for new plants addition to the national grid and to refuse politically motivated projects, improvement in transmission systems by enhancing the transmission capacity to 26,000 MW from 18,000 MW previously, developing and rolling out of national electricity policy.

The sources said, a comparative analysis was made for results of these efforts in efficiency improvements from October 2018 to February 2020, with the same period in previous years, while excluding the impact of tariff increase and fuel price adjustments and at the same level of units sale, showed a revenue increase of about Rs 100 billion. This increase resulted in increase of remittance to CPPA from the DISCOs and resultantly increased payments to power producers to level of 86% from an average of 70-72%. The private consumers' recovery in five DISCOs i.e. LESCO, GEPCO, FESCO, IESCO and MEPCO rose to almost 100%. The recovery ratio of PESCO crossed 90%, SEPCO rose to 65% from historical 50- 55%, HESCO rose to 78% from historic 70%, while QESCO didn't show much improvement.

The government decided during the 2nd quarter of the last financial year, to disallow any further increase in the form of quarterly adjustments of tariff or monthly fuel adjustments.

Copyright Business Recorder, 2020