The government had desired a higher power tariff for the next five years in an attempt to encourage investors to participate in bidding for the sale of Fesco. PHOTO: FILE
For domestic consumers, the regulator has reduced the tariff in the range of Rs0.51 to Rs2.8 per unit, for commercial consumers by Rs1.5 per unit and for industrial consumers by Rs2.7 per unit. Agricultural consumers have also got a tariff cut of Rs2.7 per unit.
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During a hearing conducted by Nepra, Fesco had sought the tariff increase to ensure a guaranteed profit to investors and encourage them to participate in privatisation of the power utility.
Fesco requested for an increase of Rs1 to Rs4.91 per unit in the first year and Rs0.58 per unit in the second year. For the next three years, it sought an increase of only Rs0.06 to Rs0.17 per unit.
Total transmission and distribution losses of the company stood at 11% in 2014-15.
Under a multi-year tariff policy, Nepra has allowed losses of 9.5% for 2015-16, 9.36% for 2016-17, 9.02% for 2017-18, 8.6% for 2018-19 and 8.1% for 2019-20.
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Fesco also made a shocking disclosure that it had made an advance payment of Rs25 billion to the Central Power Purchasing Agency (CPPA) without interest expenses which were transferred to private power producers in order to show a reduction in circular debt.
However, it was noted that the power utility faced problems in subsidy payments by the government. It also recorded higher losses and low recovery of bills.
The government had desired a higher power tariff for the next five years in an attempt to encourage investors to participate in bidding for the sale of Fesco. The five-year tariff would have provided a guaranteed return to the investors.
However, with the reduction in tariff, Fesco’s privatisation plan may hit a stumbling block and it could be further delayed.
The Nepra chairman, while hearing the arguments, voiced concern over the extra payment of billions of rupees to the CPPA and asked how it would be recovered after privatisation.
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He noted that Fesco management was collecting money from consumers on account of maintenance and operational cost, but the company had an obsolete system. He suggested that the government should put an end to the payment of subsidy after the company’s privatisation.
Published in The Express Tribune, January 2nd, 2016.
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