LAHORE: The continuous increase in power tariff by the federal government to curtail the circular debt does not seem to be working as planned. The energy sectors’ current payables have swelled to Rs425 billion against the receivables of Rs385 billion which will compel the decision makers to announce further hikes in tariffs in the near future, said a top energy manager of the country.
Talking to The Express Tribune on the condition of anonymity, he said that the hike will enable the sector to lower the per unit subsidy – currently standing above Rs3 per unit. The current cost per unit sold to consumers is Rs8.85 per unit whereas the breakeven price of each unit is Rs11.90. The government is forced to provide the amount as subsidies due to the gap – approximately Rs30 billion per month or Rs360 billion a year. However, the failure of the government to release subsidies regularly has created problems for the National Transmission and Dispatch Company (NTDC) to pay back the money to oil and gas companies hence, the circular debt trap. Besides other bottlenecks, unrealistic end-consumer tariffs are primarily responsible for not recovering the surging cost of power generation.
“The hikes in tariffs should be coupled with competent and vibrant distribution companies (DISCOs) as most of the chief executive officers of DISCOs are unsuitable persons for the post especially if we talk of recoveries”, he said. The present management of most of the Discos miserably failed to recover billed amounts from various categories of consumers. Primary reason for this failure is their ineptness and bad governance; the senior official said adding that most of these senior managers were unsuccessful in devising a system for timely recovery of accruals, he said.
The built-in flaws in the power systems and inefficiencies on part of the DISCOs were termed as the major reasons of the present energy fiasco, he said.
The hike in electricity tariff will help the sector overcome the circular debt issue slightly, said Energy Management Cell Member Ijaz Rafique Quraishi. “National Electric Power regulatory Authority (Nepra) should also be allowed to revise the tariff on weekly basis as most of the electricity is generated through furnace oil,” Quraishi said. Tariff prices will fluctuate accordingly as the Oil and Gas Regulatory Authority (Ogra) has been permitted to revise the oil prices weekly.
However, the revision of oil prices four times a month will worsen the situation for the producers because they will bear the additional cost of the fuel in case of regular hikes, he said. “Our staff will get busy in calculating the tariff rates as they are doing in shaping up the billings of unrealistic end consumer tariff,” he said.
We have to recover Rs400 billion from power consumers. Ministry of Finance has to pay Rs30 billion monthly as subsidy but the cash inflows are irregular. The amount of subsidy has mounted to Rs150 billion and we are waiting for the finance ministry to release the funds, Quraishi added.
Published in The Express Tribune, August 30th, 2012.
More in BusinessMarket watch: Bourse declines as investors bank profits