ISLAMABAD: In a bid to slash losses of power distribution companies, the government has decided to secretly penalise honest consumers, who pay their bills regularly, by recovering the entire cost of power theft amounting to Rs82 billion every year from the beginning of 2017-18.
This surprise move comes at a time when power consumers are already reeling from 8 to 12 hours of load-shedding in a day with the rise in summer temperatures.
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The decision was taken in a recent high-level meeting chaired by Prime Minister Nawaz Sharif.
Earlier, the government had stopped short of providing full relief of the slump in international crude oil prices for power consumers by imposing financial and tariff rationalisation surcharges to the tune of over Rs100 billion per year.
Apart from these, the consumers are also paying a debt surcharge to help retire debt of inefficient power distribution companies.
In the meeting, the prime minister was told that the National Electric Power Regulatory Authority (Nepra) determined the tariff for state-owned power distribution companies based on two primary assumptions - 100% bill recovery and average line losses of 15.3%, said a senior government official.
However, the assumptions were not based on ground realities in the country. The water and power secretary revealed that average bill recoveries over the past years remained in the range of 88% to 90% and line losses stood around 19%.
Owing to the difference between Nepra’s estimates and actual recoveries and line losses, the circular debt surged from Rs320 billion in October 2014 to Rs374 billion in December 2016, he said.
However, better performance of the distribution companies in 2015 and 2016 with high recoveries at over 93% and lower line losses at 16.30%, with support from cheap oil prices, restricted the expansion of circular debt. Without these improvements, the debt would have topped Rs684 billion, the secretary said.
He asked the prime minister to issue policy directives to the power-sector regulator, Nepra, to allow quarterly adjustment of the actual line losses and bill recoveries in the tariff, which would bring down the subsidy bill by Rs84 billion.
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The Finance Division secretary told meeting participants that the circular debt had reached Rs329 billion by April 5, 2017.
In an effort to curtail the debt level, he underlined the need for addressing the structural issues with Nepra pertaining to tariff determination on the assumption of 100% recoveries and average 15.3% line losses.
It was decided that the Ministry of Water and Power would approach Nepra for seeking quarterly adjustment of the actual line losses and bill recoveries in the tariff.
Published in The Express Tribune, April 19th, 2017.
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