EDITORIAL: The Economic Coordination Committee (ECC) of the Cabinet approving the revocation of the Neelum Jhelum Surcharge (NJS) was a sure thing because practically everybody was up in arms about the fact that it was being charged, at Rs10 per unit to electricity consumers, even though the project has been up and running for two years now. And Wapda’s position, which opposed swapping it for development of Diamer-Bhasha Dam (DBD), must be principally agreed with. The main reason is that unlike DBD, which is being developed under the generation licence of Wapda Hydroelectric (WH), Neelum Jhelum Hydropower Project is a standalone project, which needed the establishment of a Special Purpose Vehicle (SPV) just for its development.
This SPV has a completely independent legal and corporate status, its own board of directors, generation licence, tariff structure, financial control, etc. Its working methodology, which is regulated on the lines of the Independent Power Producers (IPPs), is very different from Nepra’s approach to hydropower stations that are included in the generation licence of WH. The Rs6 billion per annum that NJS has so far generated has formed part of federal government equity, which was collected by distribution companies (discos), and had no bearing whatsoever on WH’s tariff and revenue systems.
Wapda has been objecting to simply renaming the NJ levy to finance part of DBD since the Public Accounts Committee (PAC) issued a directive to stop its collection as far back as early September last year. When the secretary of the water resources ministry disclosed that a summary had been moved to change its name to ‘Diamer-Bhasha Surcharge’, and expressed sincere hope that it would be done soon, Wapda’s chairman flatly opposed the idea because, he said, construction of large dams required billions of rupees and could not be done through crowd funding.
Wapda is against the swap also because it believes in that instance the federal government would deduct an equivalent amount from the Public Sector Development Programme (PSDP) grant that is providing a bulk of the funding for DBD. And since the DBD surcharge would be collected, just like NJS, from electricity consumers, it fears that Nepra would also disallow an equal amount in the tariff allowed to WH. Now, along with this matter, the government must also figure out what to do about the Rs70-odd-billion extracted from consumers since the time in 2018 that discos should have stopped collecting the NJS. Some PAC members called for a complete refund, which very interestingly prompted the chairman to warn that such a step would ‘open a Pandora’s Box’.
In November the Senate Standing Committee on Planning, Development and Special Initiatives also did not go beyond calling for an immediate end to the collection of NJS, pointing out that people’s lives were already miserable enough because of high prices. Each time, when asked to explain the unfair, and also technically illegal, burden placed on the people, relevant officials simply said that the government was in the process of diverting the surcharge towards DBD. This uncertainty must be put to an end quickly. DBD is a Rs1.4 trillion (total outlay) project. Of this, the federal government is providing Rs398 billion as a PSDP grant, Wapda is pouring in Rs199 billion as equity and Rs686 billion is at the mercy of commercial financing. Surely, the project cost was calculated all the way to its expected end in 2028 and nowhere was any mention made of the need to rename NJS and route the Rs6 billion per year to DBD. The power sector presents the country’s most pressing challenges and the Pakistan Tehreek-e-Insaf (PTI) government very wisely made a lot of noise about the need for more dams as soon as it came to power. Hopefully, no unforeseen funding problem has appeared in the way of DBD, a reservoir with a height of 272 meters which after completion will be the tallest Roller Compact Concrete (RCC) dam in the world.
Now the government is seeking amendment in the Nepra act that would empower it to impose surcharge at will on electric power. A bill to this effect is before the parliamentary committee for consideration and members of the committee are sceptical about such a levy as the government has not been able to make a convincing argument for such amendment other than that it is to satisfy one of the prior conditions in the IMF programme that requires full recovery of cost of power sold. If this amendment is ultimately made in the Nepra act it would certainly add to the miseries of the people and industry who, as it is, are one of the most highly taxed electricity consumers.
Copyright Business Recorder, 2021