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ISLAMABAD: Prime Minister Shehbaz Sharif has sought a plan from Power Division to curtail theft and line losses by Rs 100 billion per annum, besides other stepwise power sector reforms such as running power Distribution Companies (Discos) on Public Private Partnership (PPP) mode, well informed sources told Business Recorder.

The directions were issued during a meeting convened to discuss ‘Kissan Package’ on November 24, 2022.

According to the State of Industry Report (SIR) 2022 of National Electric Power Regulatory Authority (NEPRA), during the FY 2021-22 the allowed T&D losses for the Discos were 13.41 percent whereas actual losses were 17.13 percent. Due to the difference of 3.72 percent, the financial loss on this account has been worked out at around Rs. 113 billion.

In addition, the Nepra determines the revenue requirement on 100 percent receivables. During the FY 2021-22 the receivables’ amount in terms of percentage was around 90.51 percent thus incurring the loss of Rs. 230 billion of the billed amounts. The overall impact on account of additional T&D losses and less recovery becomes Rs. 343 billion. This whole contributes to the accumulation of circular debt.

Power sector: Circular debt touching Rs2.6trn mark

The regulator argues that the performance of the Discos is the major concern. It is affected due to their higher T&D losses and less recovery, affecting the cash flow with the CPPA-G for onward payments to transmission and generation companies.

The regulator, in its SIR, noted that the higher T&D losses are of much concern, keeping in view the higher average fuel cost, which is increasing due to costlier fuel and devaluation of US$/PKR impact. Further, the revenue loss in case of non-delivery of the generated electricity is another issue.

The inefficiency of Discos due to higher T&D losses and less recovery does not permit them to enforce AT&C loss-based load shedding. It has been further observed that due to load shedding the recovery of the capacity charges from the respective feeders is also lost, which is another issue for the power sector.

According to Auditor General of Pakistan, Nepra’s fixed targets of energy losses ranged from 9.34 per cent to 21.33 per cent for the financial year 2020-21. As many as 10,0656 million units valued at Rs 170.518 billion were lost due to the difference with Nepra’s target. For instance, Nepra’s target of losses for the Hesco was 19.74 per cent whereas the company’s actual losses were 28 to 62 percent. The company’s unit loss beyond Nepra’s target was 1,923 million units, whose total financial impact was Rs 28.84 billion. The losses of Mepco were Rs 2.576 billion, Pesco Rs 90.5 billion, Qesco Rs18.186 billion, Sepco Rs 29.960 billion and Tesco Rs 495.7 million.

The Nepra has been continuously indicating that the governance issues in Discos are required to be addressed to reduce their losses, which are resulting in enhancing the circular debt. However, no significant improvement has been seen on the part of the Discos in this regard. During FY 2021-22, the overall actual losses of the Discos were 17.13 percent as against the actual loss of 17.95 percent during FY 2020-21. This increase in T&D losses is much higher than the allowed T&D losses for FY 2021-22, which was 13.41 percent. The Discos need to focus on higher T&D losses and effort should be made to bring them down to at least the level of the given targets.

The Nepra determines the consumer-end tariff for the Discos on a 100 percent receivables basis and does not allow any inefficiency on this account. It has consistently highlighted this issue in the previous SIRs and has been stressing to take remedial actions to address this.

Copyright Business Recorder, 2022

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