Power sector losses of Rs200b to be recovered from defaulters

Finance minister says only current losses may be considered while determining new tariff

ISLAMABAD: The country’s economic managers are looking to recover a loss of Rs200 billion from power-sector defaulters and bring down the overall loss to 16.3%, as allowed by the regulator.

It turned down the Power Division’s plea to pass on the Rs200-billion loss on account of electricity theft to honest consumers which were paying their bills regularly. Officials revealed that Finance Minister Asad Umar, while chairing a recent meeting of the Economic Coordination Committee (ECC), disagreed with the Power Division which sought the inclusion of Rs202-billion loss in the proposed tariff increase.

At present, actual line losses in the power sector stood at 18.3%, but the National Electric Power Regulatory Authority (Nepra) allowed recovery of 16.3% from the consumers, which led to addition of Rs202 billion to the circular debt. The Power Division wanted to shift the 2% differential to the honest consumers.



However, the finance minister said only current losses of the power sector may be taken into consideration while determining the consumer tariff.

It was also noted that the proposed tariff increase would put a significant burden on the power consumers who had already been suffering due to hike in prices of essential commodities in the country. Therefore, a careful decision was required to be taken on the issue. The ECC chairman was of the view that it would be unfair to pass on the power-sector losses to the honest consumers as the losses were the outcome of inefficiency and mismanagement on the part of power companies. He questioned as to why an illegitimate amount was being added to the system.

He emphasised that losses should be recovered only from the defaulters and expressed disappointment over the incompetence of power-sector entities, which had failed to recover outstanding bills from the defaulters.



He called for bringing improvement in the recovery of electricity bills and reducing line losses and in the case of failure, there would be no end to the growing circular debt, which had already put the economy in a precarious situation. Circular debt had reached Rs600 billion, the meeting was told. The finance minister also directed the Power Division to provide details of capital cost incurred by independent power producers (IPPs) and their demand for capacity payment.

The Nepra chairman informed the meeting about the different factors considered for determining the tariff.

The ECC directed the Power Division to consult Nepra while framing a comprehensive tariff rationalisation plan for the power sector and submit a report.

Bill recoveries stood at 90%, adding Rs205 billion to the circular debt. Another Rs102 billion was added to the debt due to delay in payment of subsidy to the former Federally Administered Tribal Areas (Fata), which are now part of Khyber-Pakhtunkhwa, Azad Jammu and Kashmir and industrial units.

An amount of Rs86 billion was due against K-Electric.

Officials revealed that a tussle had been going on between the Power Division and Nepra in the past as the previous Pakistan Muslim League-Nawaz (PML-N) government pressed the regulator to increase the line loss benchmark in order to recover the loss from the consumers.

It opposed the tightening of noose around heads of power distribution companies in an attempt to control theft.

During its 2013-18 tenure, the PML-N saddled consumers with a surcharge of Rs2.3 per unit, which inflated their electricity bills. It also imposed several new surcharges including the financial cost surcharge, tariff rationalisation surcharge and debt servicing surcharge to pocket billions from the consumers.

The former government also borrowed Rs180 billion to finance the circular debt in the last two months of its tenure and the amount was being recovered from the consumers through surcharges in their electricity bills.

Published in The Express Tribune, October 4^th, 2018.

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