ISLAMABAD: The federal government has reportedly asked AJ&K government to establish its own power Distribution Company (Disco) and purchase electricity through Central Power Purchasing Agency-Guaranteed (CPPA-G) as yearly deficit between sale and purchase has reached the level of Rs 90 billion, well informed sources told Business Recorder.

On May 13, 2024, while presiding over a high-level meeting, Prime Minister Shehbaz Sharif constituted an inter-ministerial committee to decide about Water Usage Charges (WUC) of AJ&K.

Electricity to the territories under AJ&K is being provided in bulk by three Distribution Companies (Discos) i.e., Islamabad Electric Supply Company (IESCO), Peshawar Electric Supply Company (PESCO) and Gujranwala Electric Power Company (GEPCO) under special contracts and on the basis of tariffs notified by NEPRA/ GoP (K-Tariff).

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AJ&K Electricity Department receives the power in bulk @ Rs. 34.65 /kWh, non-ToU, Rs. 40.35 /kWh, ToU-peak and Rs. 33.45 /kWh ToU-off-peak along with fixed charges of Rs. 440/kW/M. However, the AJ&K Government pays @ Rs. 2.59 /kWh to Discos, which results in per year deficit of around Rs. 90 billion. AJ&K government; however, charges its consumers at the rate notified by the GoP.

The matter was deliberated by different competent fora like Economic Coordination Committee (ECC), Cabinet Committee on Energy (CCoE), Federal Cabinet on several occasions and subsequently multiple committees were constituted. However, the matter could not attain any amicable solution.

The Special Assistant to the Prime Minister on Finance & Revenue chaired a meeting on the subject on January 30, 2023 in the Finance Division, wherein it was imparted that the current tariff regime in AJ&K is not efficient and creates cash flow issues for both AJ&K and the federal government. In the light of decisions taken during the aforesaid meeting, the matter was further deliberated by the Power Division and inter-alia decided to proceed in accordance with the mandate rendered to the committee to determine future tariff for the AJ&K pursuant to the clause 5.2(b) of Mangla Raising agreement signed among the Ministry of Water & Power, WAPDA and GOAJ&K in 2003. The composition of the committee thereof, was as follows: (i) Secretary Water and Power; (ii) Chairman WAPDA; (iii) Chief Secretary AJ&K; (iv) Joint Secretary (Power Finance) Finance Division; and (v) Joint Secretary (KANA & SAFRON).

The committee deliberated the issue and inter-alia set a principle for tariff mechanism for AJ&K; i.e., “to create a new tariff category for AJ&K consumers wherein electricity will be provided to the AJ&K on national average basket rate; i.e., rate at which other Discos are procuring electricity from CPPA-G. However, special subsidy provisions for AJ&K would be considered owing to its special status.”

The Committee’s recommendations were further deliberated and finalised under the meeting held by the Special Assistant to the Prime Minister on Finance & Revenue on May 29, 2023 in Finance Division.

The meeting was attended by the Finance Secretary, Secretary Power, Additional Finance Secretary (CF), AS (I & II) Power Division, Chief Secretary AJ&K, Finance Secretary AJ&K, Secretary Power AJ&K and Joint Secretary KA&GB Division. After detailed deliberations, it was inter-alia decided that Power Division may draft a revised tripartite agreement based on the principles as mentioned above.

In order to frame tripartite agreement based on the proposed principles, a meeting with the GoAJ&K was scheduled for June 23, 2023.

Pursuant to the request of GoAJ&K made on June 21, 2023 the meeting could not be convened. Later, the Prime Minister of AJ&K during the meeting with the Power Division on August 24, 2023 vowed to not accept any development on the issue, until their pending financial issues with the Finance Division/ FBR are resolved.

Power Division, sources said, proposed the following way forward: (i) NTDC/ CPPA-G may directly supply 2,182 million units of electricity to AJ&K, eliminating the role of Discos from FY 2024-25 and raise invoice based on the prevalent basket price. AJK will pay to CPPA-G the full amount as per the invoice;(ii) Ministry of Finance may allocate as grant-in-aid of Rs.25 billion from FY 2023-24 in order to cover the anticipated shortfall in the payments to be made by AJK to CPPA-G. The net payable by GoP will be Rs.25.00 billion minus the Water Usage Charges (WUC) from Mangla Dam and NJHPP; (iii) Government of AJ&K will prepare T&D loss reduction plan spanning over 6 years to bring down T&D losses to the levels prevailing in adjacent Discos (GEPCO and IESCO) and a plan to improve recovery to 80% over a period of 5 years. In this regard a Performance Agreement from 2024-25 to FY 2029-30 to improve recovery and reduce T&D losses will be signed between GoP (Power Division & Kashmir Affairs & Gilgit Baltistan Division) and GoAJ&K; (iv) local generation in AJ&K will not be diverted to the NTDC/ national transmission network. Accordingly, there will be an annual proportionate reduction in the Rs.25 billion grant in aid provided by GoP; and (v) GoP will provide technical and administrative support to AJ&K electricity department during the transition phase for setting up their own Disco.

As the AJ&K government has notified new rates for electricity consumers of territory after meeting with the Prime Minister of Pakistan, which also includes Rs 10 per unit for commercial consumers using 1-300 per unit and Rs 15 per unit for consumers consuming over and above 300 units monthly, a discussion has started in Pakistan as to why commercial consumers of Discos should pay Rs 75 per unit. Likewise, domestic consumers, paying about Rs 45 per unit including taxes have also raised the same questions at different sittings.

Copyright Business Recorder, 2024

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Pakistani May 15, 2024 01:32pm
I thought the government was privatizing discos in all other provinces?
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