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ISLAMABAD: The National Electric Power Regulatory Authority (Nepra) has formally approved surcharge of Rs 3.23 per unit for all categories of consumers across the country sans protected domestic consumers using up to 200 units per month as per understanding with the International Monetary Fund (IMF).

The decision has been taken on a federal government’s motion, filed by the Power Division to recover a substantial amount from the consumers to pay mark-up on PHL loans and clear circular debt.

The Authority in order to provide an opportunity to the federal government to present its case, and all the relevant stakeholders involved, decided to conduct a hearing in the matter, which was held on March 16, 2023 and through Zoom.

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While responding to the query from the Authority regarding financial obligations of the federal government, the representative of the Power Division explained during the hearing that presently the financial obligations of the government are around Rs 2.6 trillion, which includes over Rs 1.7 trillion payables to IPPs and Rs 765 billion of PHL loans.

Through the instant motion, the total surcharge would be around Rs 335 billion, which will cover Rs 126 billion of the PHL markup, and the remaining Rs 209 billion to cover the flow of circular debt. It also submitted that there are multiple factors /reasons for these payables to IPPs, which primarily include interest payable to IPPs for not making timely payments to them, delayed application of monthly FCAs and quarterly adjustments etc.

It was also apprised that the federal government has already paid Rs 230 billion of PHL loans principal amount, thus reducing PHL loans and subsequent reduction in the amount of markup. It also submitted that the federal government, as per the available resources, is paying the principal amount of PHL, as it becomes due, thus, reducing the amount of markup.

The Authority observed that flow of circular debt also includes inefficiency of Discos in terms of extra T&D losses and under recoveries.

Upon inquiry from the Authority for any structural plans by the Power Division to minimise inefficiencies of Discos, induction of cheap electricity for which tariff has already been granted by the Nepra, and addressing governance issues in the power sector, the Power Division submitted that the current financial exposure has resulted in a liquidity crunch situation and “we all need to work together to resolve these issues.”

The Power Division stated that option of provincialisation of Discos, decentralisation of Discos through independent Boards with accountability through KPIs, improvement in loss reduction through investments, outsourcing of high loss feeders, cost reduction through negotiations with IPPs, increasing the share of renewables, exploring the options of PPP and circular debt management plan are all being considered to remove/minimise inefficiencies so that 2 to 3 years down the line, Discos could be transformed.

Tanveer Barry, representing KCCI, opposed the motion by submitting that these are inefficiencies of Discos which should not be passed on to the consumers. He further stated that since the surcharge would only be used for interest payments, and not the principal amount, therefore, these surcharges would continue indefinitely.

Copyright Business Recorder, 2023


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