Fans replacement in Discos, KE: NEECA seeks PD’s help on mode of financing
ISLAMABAD: National Energy Efficiency and Conservation Authority (NEECA) has sought the Power Division’s support to implement the Prime Minister’s proposal of on-bill financing mechanism of fans replacement in Discos and K-Electric, well-informed sources told Business Recorder.
Sharing the details, sources said, a meeting was held on May 22, 2024 under the chairmanship of Finance Minister, attended by the Federal Minister for Energy (Power Division), Minister of State for Finance, Revenue and Power, Federal Secretary Ministry of Energy (Power Division), Governor SBP and Chairman Pakistan Banks Association. The State Bank of Pakistan presented the financing model of fan replacement program through on-bill financing mechanism.
According to sources, it was decided that it will be SBP responsibility to take on-board the banks that will be lending at KIBOR +2% and Government of Pakistan will provide 10% first loss risk guarantee. The banks will have first right at-source deduction of the installment from the subscribing consumer through electricity bills. NEECA will ensure on boarding of the fan manufacturers, development of the portal, and overall implementation of the PM’s fan replacement program. Power Division will ensure implementation of on-bill financing mechanism through DISCOS, K-Electric and Power Information Technology Company (PITC).
The sources said NEECA has coordinated with banks as well as Discos, K-Electric and PITC. To finalize the said Program, NEECA has requested that Power Division directs all Discos , K-Electric and PITC to implement the on-bill financing mechanism by taking the following actions: (i) Discos including K-Electric to authorize their respective online collecting agents (e.g. NADRA, 1-Link and banks) to deduct bank’s installments at-source as well as signing the tripartite agreement; and (ii) PITC to provide ‘Live API’ access for requisite consumer data to Punjab Information Technology Company (PITB) for implementing and testing of on-boarding eligible electricity consumer for the program.
According to the proposed program: (i) offer peak saving of 6000-7000 MW through replacement of inefficient and sticky stock of fans in the country over a period of 10 years and directly support reduction of capacity charges against cooling load of 11000 MW in summers; (ii) nudge the market (especially small households) and provide a demand push for efficient fans through removal of up-front financing challenges; and (iii) cater to consumers having good recovery profile with Discos where currently there are 22 million compliant consumers across the country .
The program offers an attractive pay back periods of 13-18 months depending upon the mode of financing against the net replacement cost of Rs 10,500/fan.
Copyright Business Recorder, 2024
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