The central government has turned down Punjab’s proposal for an increase in electricity production by relying more on expensive oil-run plants than hydropower generation and said load-shedding “for a few hours” is more bearable than burdening consumers with an increase in tariffs.
Punjab government representatives demanded the increase in electricity production taking the plea that massive load-shedding in the province had started disrupting supply of essential items, causing an increase in their prices.
The proposal was floated by officials of the Punjab Industries Department in a meeting of the National Price Monitoring Committee, held here on Tuesday under the chairmanship of Finance Secretary Dr Waqar Masood.
A senior finance ministry official told The Express Tribune that the proposal suggested “removing supply bottlenecks”. However, he said hydropower generation cost less than a rupee per unit compared to around Rs12 per unit cost for oil-based plants.
The difference would eventually be passed on to the consumers through fuel price adjustments and surcharges and that would be unbearable as compared to 3 to 4 hours of load-shedding in a day, he added.
Furthermore, hydropower production is expected to improve and pick up pace by the end of January that will largely address the issue of outages.
People are facing extensive electricity outages this winter due to closure of canals for maintenance and less-than-required fuel supply to thermal power plants aimed at controlling runaway subsidies.
A water and power ministry official said power generation stood at 9,450 megawatts against demand of 12,500 megawatts on Tuesday.
Against an installed capacity of 6,516 megawatts, hydropower generation remains at around 1,000 megawatts.
For the current fiscal year, the government had estimated an increase of 15 per cent in power tariff to recover full cost of production.
However, the Lahore High Court granted a stay against the first increase of 4 per cent, in effect stalling the whole process. However, the government is trying to recover the cost through indirect means like fuel adjustment and equalisation surcharges.
The meeting of the price monitoring committee was convened to review the price situation and possible remedies to address the supply bottlenecks.
According to Pakistan Bureau of Statistics data, the pace of increase in prices of essential items has decelerated to 9.7 per cent in December over the same month last year, the lowest increase in the last two years.
However, there are risks ahead as inflation may again slip into double digits due to multiple factors. These include increase in wheat support price to Rs1,050 per 40 kg from Rs950 last year, hefty government borrowing from banks and increase in petroleum product prices due to the US-Iran standoff. These are likely to contribute to taking inflation to around 12 per cent by the end of fiscal year in June, according to a finance ministry presentation to the parliamentarians.
In the price monitoring committee meeting, the finance secretary told the provinces to remove supply bottlenecks as vast differences in prices of essential items had been noted among four provinces. The provinces were asked to work out mechanisms for stabilising prices of onion, potato, tomato and garlic.
Published in The Express Tribune, January 25th, 2012.
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