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ISLAMABAD: The Power Division has sought supplementary grant amounting to Rs. 52.282 billion in addition to the allocated subsidy for current FY 2020-21 on behalf of AJ&K as the latter is still paying @ Rs. 2.59/kwh to the Discos, official sources told Business Recorder. Electric power to territories under Azad Jammu & Kashmir (AJK) is being provided in bulk by three Distribution Companies namely Islamabad Electric Supply Company (Iesco), Peshawar Electric Supply Company (Pesco) and Gujranwala Electric Power Supply Company (Gepco) through a number of supply points on the basis of tariffs notified by Nepra.

The Electricity Department of AJK is provided power in bulk @ Rs. 18.79 /kWh non-ToU, Rs. 24.49 /kWh ToU-peak and Rs. 17.59 /kWh ToU-off-Peak. The Government of AJ&K/Electricity Department pays the Discos at the rate of Rs. 2.59 /kWh, which results in per year deficit of around Rs. 38 billion. AJ&K Government however, charges their consumers at the rate notified by the GoP (uniform /Iesco's notified tariff).

The ECC on March 20, 2019 directed: (i) bulk power supply to AJK should be made from CPPA-G as is being done in case of KE as per tariff determination by Nepra; and (ii) Federal Government support for power cost differential of Rs. @2.59 /kWh against GoP notified rate shall be eliminated and deficit grant to the Government of AJK shall be adjusted against the revenue from this source.

ECC further decided that on account of AJ&K receivables of three Discos i.e. Rs. 119.05 billion (Iesco Rs. 80.58 billion + Gepco Rs. 15.08 billion + Pesco Rs 23.39 billion), Rs. 18.6 billion are on account of taxes. From balance of Rs 100.5 billion. (119.05- 18.6), Rs. 27 billion will be adjusted as cash @ Rs. 9 billion per year, Rs. 16 billion as non-cash against the re-lent loans for the Discos and the balance Rs. 57.5 billion as equity in the Discos in ratio equivalent to the percentage share of their outstanding liabilities against CPPA. Claims of AJK subsidy beyond June 30, 2019 will be dealt with in accordance with agreement of GoAJK.

Power Division further states that Rs. 126.2 billion were outstanding against the government of AJ&K by June 30, 2019.

The issue was again deliberated during the meeting held on September 16, 2020, under the chairmanship of Prime Minister of Pakistan, wherein it was decided that the proposal for change in bulk tariff rate for AJ&K be presented to the ECC.

The Finance Division has budgeted only Rs. 3 billion for FY 2020-21. However, as a matter of fact, Government of AJ&K is still paying Rs. 2.59/kwh against the tariff notified by Nepra and subsequently Rs. 55.282 billion (Rs. 36.120 billion from July 01, 2019 to June 30, 2020 and Rs. 19.162 billion from July 01, 2020 to December 31, 2020) has been accumulated against the AJ&K till December 31, 2020.

Power Division has submitted the following proposals for consideration of the ECC of the Cabinet; (i) Finance Division may provide supplementary grant amounting to Rs. 52.282 billion in addition to the allocated subsidy for FY 2020-21 as AJ&K is still paying @ Rs. 2.59/kwh to the Discos; (ii) Finance Division may budget Rs. 38 billion subsidy/ year under this head; (iii) pursuant to Mangla raising agreement 2003, only net cost of electricity is being charged from the AJ&K consumers excluding surcharges, which are not being charged on electricity supply to the AJ&K. Finance Division may provide surcharges amounting to Rs. 14.332 billion ( Rs. 12.697 billion IESCO + Rs. 760 million Gepco and Rs. 874 million of Pesco till June 30, 2019) in cash as this is included in operating cost/revenue requirements of these Discos or alternatively treat that amount as equity adjustment.

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