ISLAMABAD: The federal government is said to be facing a catch-22 situation with respect to increase in base tariffs of power Distribution Companies (Discos) by Rs 3.34 per unit to recover over Rs 300 billion from consumers.
Discos, existing average tariff is Rs 14.94 per unit, of which Rs 13.35 per unit is base tariff whereas existing quarterly adjustment is Rs 1.59 per unit. The proposed average tariff will be Rs 18.28 per unit, of which new base tariff is Rs 16.69 per unit and existing quarterly adjustment is Rs 1.59 per unit.
Background discussions with officials indicate that the government is facing very difficult situation on the proposed increase in tariff as on one hand its political opponents are a big challenge these days and in days to come, and on the other the IMF and other financial institutions are pressing for an increase in tariff immediately.
"If the government does not increase tariff as per the determinations, the circular debt which is now Rs 2.4 trillion will touch the Rs 3 trillion mark. This will be in addition to payment of Rs 450 billion to the IPPs," said who are the officials privy to the situation.
Prime Minister Imran Khan, recently stated that he is spending sleepless nights due to power sector issues.
Informed sources told Business Recorder that the Power Division is drafting a summary seeking approval from the Federal Cabinet to increase tariff after which, a petition will be submitted to Nepra for approval of a uniform tariff.
The regulator has approved tariffs of Discos as per adjustment/indexation of tariff for the FY 2019-20 under MYT.
The sources said the government is planning to stagger the proposed increase in tariff but no final decision has been taken so far. The same proposal had been proposed by former Secretary Irfan Ali to the government, but his plan was turned down without any reason being given.
The government is also reluctant to pass the impact of fuel price adjustments from November 2019 to June 2020 due to any political backlash.
The sources said Power Division will also send the determinations of Discos to the Ministry of Finance so that the latter could calculate the subsidy amount for the low-income groups and agriculture sector.
According to a senior official of the Power Division, industrial and commercial consumers are cross-subsidizing Rs 250 billion which is why Prime Minister says industrial tariff is 25 per cent more expensive in Pakistan as compared to India and Bangladesh. In addition, cross-subsidy of Rs 200 billion is being given by the federal government, which is financially unsustainable.
In September, 2020, Power Division had calculated an increase of Rs 6.06 per unit in power tariff to clear the backlog of circular debt in financial year 2023.
According to Nepra, major challenges are as follows; (i) operation of inefficient public sector Gencos; (ii) under-utilization of "take or pay" based power plants; (iii) noncompliance of Economic Merit Order; (iv) Transmission & Distribution System Constraints; (v) load-shedding on the basis of AT&C losses (not approved by NEPRA) and ;(vi) declining energy sales and recoveries due to pandemic.
Copyright Business Recorder, 2021
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