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coronavirus
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VERY HIGH
Source: covid.gov.pk
Pakistan Deaths
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2324hr
Pakistan Cases
1,353,479
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Islamabad
115,047
KPK
183,403

ISLAMABAD: Chairman, National Electric Power Regulatory Authority (NEPRA), Tauseef H. Farooqi said on Wednesday that exorbitant subsidies and inefficiencies of power sector are key factors behind the Rs2.4 trillion circular debt.

He disclosed the figures of circular debt at a public hearing regarding fixation of tariff of electric vehicle charging stations.

The issue of circular debt’s stock was discussed at a recent meeting of federal cabinet and the government appeared perturbed about different figures of circular debt. The government has claimed that stock of circular debt was Rs 2.280 trillion as of June 30, 2021 but Chairman Nepra maintains that the stock is Rs 2.4 trillion - a substantial difference in the figures.

Vice Chairman, Nepra, Rafique Ahmad Shaikh Member KP, Engineer, Maqsood ur-Rehman and Member, Balochistan, Rehmatullah Baloch also asked vendors some questions.

The representative of Engineering Development Board (EDB) Asim Ayaz informed the Authority that the EDB is implementing agency of EV policy including tariff and manufacturing certificate.

He said it is the prerogative of Nepra to decide tariff but the EVs' running cost will not be substantial and adoption will be very low. He stated that Nepra has given two approvals in motorcycle segment and one in Rickshaw, adding that no approval has been granted for four wheelers.

He also suggested that Nepra should give its input on standards of charging stations/points, i.e., European chargers, Chinese chargers, etc. One of the representatives of industry, Waleed Bin Aamir suggested that a special tariff should be offered by the government on establishment of charging stations to encourage investment in this segment.

Circular debt may hit Rs2.7trn mark

He further contended that industry would be able to consume surplus power, due to which circular debt is being added onto. The concessional tariff will help consume more power and generate revenue in addition to creating jobs.

Chairman commented that it is the Ministry which can extend a subsidy and not Nepra, as the latter’s role is to determine tariff only.

“If the Ministry wants to fast track the project of Electric Vehicles, they can always consider giving subsidy. Nepra can only send its advisory to the concerned authorities that it’s a new project and country has surplus electricity, and that the viewpoint of stakeholders be considered.

He said the regulator will be very careful in its advisory to the government for subsidy because of current stock of circular debt of Rs2.4 trillion, which is the result of different factors, one of which is subsidy which is why Nepra will be very careful before suggesting anything like that.

“We actually want this, and an effort is being made that the market forces should run it and we appreciate the comments of stakeholders for suggesting EVs charging business be deregulated without fixing any cap,” he added.

Chairman Nepra; however, stated that if regulator suggests subsidy and uncapped upper limit of tariff then it will be unfair to the people. “If you are seeking subsidy, then don’t demand uncapping upper limit of tariff. Both concessions are impossible,” he maintained.

The representatives of private sector, who have installed charging points and also intend to expand the network across the country, argued that presently the cost is around Rs 80-85 per unit and if Nepra caps it at Rs 47.7 per unit, it will discourage investment in this field.

“Subsidy will be better for the investors, who intend to invest in this segment,” said a representative of PSO, adding that the company has petrol pumps for this purpose but allowing private investors would not be feasible for at least next three four years.

Another representative proposed that if the government does not want to give subsidy, then at least, it should allow wheeling so that investors purchase cheap electricity to provide it to Electric Vehicles.

It was also proposed that the government should consider special tariff for those charging points, which will be established near IPPs, so that surplus power is consumed and capacity payment is not paid by the government.

Waleed further stated that many customers are disturbed due to high tariff. The company has established EV charging points at Bhaira and Pindi Bhatian on motorway and cities. People are using it but they are concerned about higher tariff.

Chairman Nepra clarified that the regulator is not giving sale and purchase price but capping the price at Rs47.07 per unit which means that none of the vendors will charge price higher than fixed upper limit aimed at protecting the consumers.

He said exorbitant subsidies and inefficiencies are the main contributors to the circular debt and if Nepra deliberately creates inefficiency by offering subsidies in this case, then from where would the recovery be made?

Circular debt: World Bank, govt think deeply about steps

“If we repeat the mistakes made in the past, then how can we generate revenue? We have to look into the ground realities of power sector’s financial matters and determine to what extent subsidy can be given at this stage,” he said.

The proposals to invite auto assemblers, off peak hour tariff and other concessions were also floated during the meeting.

NEPRA has prepared three pricing options which are as follows: (ii) private sector to set up customer charges / tariff with no price caps; (ii) giving a ceiling, private sector to compete to reduce tariff below ceiling; and (iii) determine customer charges / tariff for all private EV charging stations.

NEPRA made its assumptions on the basis of availability of CAPEX, OPEX data, debt: equity, market based cost funds, utilization rate-20 per cent (average), electricity input rate, Rs 20/ kWh and tariff Rs 47.07/kWh.

The industry’s representatives’, Haseeb Khan, Ammar Talaat, Ahmad Bilal, Kamran Malik, Rabia Akhtar, Wajid Siddiqui, Abdullah Jawad and a few others expressed their views on the proposed tariff for the EV charging stations.

Nepra has asked all the stakeholders to send their viewpoints in writing so that the regulator can reach an informed decision.

Copyright Business Recorder, 2021

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