ISLAMABAD: The Power Division has come up with a proposal suggesting reversal of the earlier government decision on passing the Rs118-billion cost of industrial support package on to power distribution companies and wants the allocation of funds for the package through federal budget.
Earlier, the government had decided that the power distribution companies including K-Electric would bear that burden by making improvement in the recovery of bills and reducing line losses.
However, the Power Division was of the view that funding the industrial support package through efficiency gains in the power sector did not fall within the legal or regulatory domain, therefore, the funding need should be met through budgetary allocation.
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Sources told The Express Tribune that the Economic Coordination Committee (ECC) of the cabinet, in its meeting held on October 24, 2018, had decided that industrial consumers would continue to be provided with Rs3 per unit as the support package. It was also decided that funds for the package would be made available through efficiency gains in the power sector by improving bill recoveries and reducing line losses.
It was agreed that tariff change for the industrial consumers would remain within the revenue requirement. Average tariff increase over the last notified tariff would be Rs0.78 per unit. Five zero-rated industries would be offered a tariff rate of 7.5 US cents per unit.
For slashing losses and improving bill recoveries by the power distribution companies, it was agreed to set a target of Rs60 billion for the current fiscal year 2018-19. In addition to the recovery of past dues of Rs80 billion, it would also be ensured that the impact of industrial support package was offset in the current financial year.
The ECC again took up the matter of funding the industrial support package in its meeting held on January 29 this year. The Ministry of Energy (Power Division) presented its point of view, suggesting that the support package should be financed through the federal budget as funding through efficiency gains in the power sector did not fall within the legal or regulatory domain.
Furthermore, it pointed out, the Rs200-billion syndicated Islamic financing for the power sector had to be repaid through the same revenue stream. The ECC accepted the arguments but pointed out that such arrangement had already been discussed and documented, and it would not be possible to reopen the same. However, the Power Division reiterated its point of view.
Moreover, it said, the recovery of past dues and past efficiency gains in the power sector were not possible legally as well as from the audit point of view.
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The Power Division said it was committed to reducing the losses and enhancing recoveries, but those efforts would ultimately be reflected in a reduction of the circular debt. The amount to date has accrued to Rs 118.38 billion (Discos Rs 86.78 billion and KE Rs 31.6 billion).
The ECC directed the Power Division to work out a settlement plan for past liabilities on account of industrial support package in consultation with the Finance Division and Ministry of Industries and submit a report for analysis on continuation of the package.
Published in The Express Tribune, May 28th, 2019.
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