Power tariffs may go up by nine per cent

Shahbaz Rana June 15, 2010

ISLAMABAD: Working with a robbing-Peter-to-pay-Paul principle, the government is set to increase power tariffs to pay Khyber Pakhtunkhwa’s hydel profits. And the combined impact of this increase as well as the withdrawal of subsidies, says a senior government official, will see tariffs shoot up by at least nine per cent.

On Monday, Water and Power Development Authority’s  member finance Chaudhry Abdul Qadeer told a Senate panel that any hydel profit payouts to Khyber-Paktunkhwa will be recouped from consumers by hiking up electricity tariffs.

Hydel power comprises about one-third of Pakistan’s energy mix. Of an average tariff of Rs6.80 per unit, hydel costs Rs1.03 per unit. But Qadeer says Wapda has already asked the National Electric Power Regulatory Authority for permission to increase the hydel tariff to Rs 1.37 per unit. “If Nepra agrees to the proposed 34 paisa increase in hydel tariff, the overall tariff will go up by about two per cent,” he explained.

Making matter worse for consumers is the fact that July is also the month subsidies on electricity will stand withdrawn. Earlier, under pressure from the IMF, the government had said it would withdraw the subsidies by April 1 this year but postponed application for political reasons. In July, however, the withdrawal will kick in and push up tariffs by 40 paisas or six per cent of the average tariff.

But that’s not all. “On top of that, the decision to withdraw tariffs is to be applied retrospectively,” adds Qadeer. “This means the government will also recover arrears stemming from the delayed withdrawal of subsidies and the impact of this will be to push up tariffs by approximately one per cent.”

However, even nine per cent is not the final figure. Clubbed onto electricity bills will be the General Sales Tax, the rate of which has already gone up to 17 per cent from the earlier 16 per cent.

And then there is the matter of the calculation of hydel profits, which the central and KP governments have been unable to resolve so far. “A tribunal set up to resolve the issue ended up pegging the profits to inflation, which is not only a flat rate but also in conflict with constitutional provisions,” says Qadeer.

When the 7th National Finance Commission award was being deliberated on, the centre agreed to pay Rs 110 billion in hydel profit arrears for a five year period. “The government felt it had to do this to get the province’s support but this was for arrears up to 2006 only and, critically, the NFC award still didn’t specify computing methodology,” complains Qadeer.

As Qadeer explained to the Senate committee, if the provincial government’s methodology were to be accepted, the other provinces would have to pay KP up to Rs 25 billion in hydel profits from the existing Rs 6 billion. “And that too will be recovered from the consumers by increasing tariffs,” Qadeer warned the committee. At present, Nepra is expected to come up with a method acceptable to all which will need endorsement by the Council of Common Interests.

Published in the Express Tribune, June 15th, 2010.


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