K-Electric’s Rs42b subsidy claims spark concern

Finance ministry calls for rationalising subsidy amount

ISLAMABAD:

The Ministry of Finance has voiced concern over the highest subsidy claims made by K-Electric and requested the Ministry of Water and Power to rationalise the payments.

The issue came up for review in a meeting of the sub-committee on K-Electric affairs on January 5.



Officials of the finance ministry told the committee that the subsidy claimed by K-Electric was the highest when compared with other power distribution companies and was almost equal to the combined subsidy claims of all other distribution companies.

Terming the situation alarming, they asked the Ministry of Water and Power to look into the matter and rationalise K-Electric’s subsidy claims. According to officials of the water and power ministry, the company has claimed Rs42 billion in subsidy payments.

During the deliberations, issues related to the Central Power Purchasing Agency (CPPA) were also taken up for discussion.

Joint secretary of the water and power ministry recalled that it had earlier been decided that the CPPA and National Transmission and Despatch Company (NTDC) would share draft of a new power purchase agreement with K-Electric about supply of 650 megawatts to the power utility.



Subsequently, the agreement was shared with the company on December 28, 2015.

K-Electric Chief Executive Officer Tayyab Tareen spoke about the consumer growth pattern in Karachi and the difficulty in an instantaneous reduction because of various factors including but not limited to capacity, impact on tariff differential claims, consumer subsidy, etc.

He said a yearly average lower than 650 megawatts could be agreed to address the capacity issue while a higher subsidy and tariff differential were also the areas where the impact was understood.

Some meeting participants pointed out that a fixed power supply quota for K-Electric was not possible anymore in view of the growing demand from other areas of the country.



K-Electric should utilise its own generation capacity and then look at other scenarios, they said. However, if extra energy is available in the national grid, it will be provided to the company.

The committee asked the CPPA to discuss terms and conditions of the new power purchase agreement with K-Electric and present a report.

Talking about electricity supply to the Karachi Water and Sewerage Board (KWSB), the CEO of K-Electric said they had held several meetings with the Government of Sindh for reconciliation of outstanding bills of the remaining 17 connections of the water board.

However surprisingly, KWSB has now requested for reconciliation of bills of all other 280 connections from April 2009 to July 2015. The “willful default strategy” of KWSB caused concern among committee members as it had resulted in an increase in liabilities of the Sindh government and caused power sector crunch.

According to the CEO of K-Electric, KWSB’s liabilities have surged to Rs42 billion. Meeting participants decided that they would send a request to the Sindh government for clearing the liabilities of KWSB immediately. They also agreed that power connections of strategic customers would also be cut off if they defaulted on payments.

Published in The Express Tribune, February 4^th,  2016.

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