Pakistan’s honest electricity consumers are robbed of Rs675 billion annually to pay for power subsidies and are over-billed by Punjab-based power distribution companies (DISCOs) to inflate their performance, reveals a briefing by the country’s top energy sector manager.
Secretary Power Rashid Langrial said on Monday that out of Rs900 billion in electricity subsidies, the government was paying only Rs327 billion from budget and the rest was recovered from the consumers. Information Minister Murtaza Solangi was also present in the briefing.
This leaves a balance of Rs573 billion to be recovered from the domestic, commercial and industrial consumers to pay for consumers of less than 400 units per month and for agricultural tube wells, revealed Langrial.
He further disclosed that Punjab-based DISCOs were involved in over-billing to the consumers by at least Rs100 billion per annum to show low losses and high recoveries.
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The candid briefing shows how people have been forced to cough up additional money to pay for the cost of inefficiencies and the state’s failure to collect due taxes. However, the secretary did not share details of any action being taken against power sector officials for the over-billing.
The government’s inability to directly tax the people is now resulting in recoveries by charging them higher than the actual cost of power generation.
The secretary said that out of Rs900 billion, all types of electricity consumers were paying about Rs575 billion in subsidies to pick the cost of low tariffs for consumers of up to 400 units.
Out of the Rs573 billion cross subsidy, the domestic consumers having consumption of 400 units per month were paying Rs5.88 per unit extra. Commercial consumers were paying an additional Rs8.15 per unit and industrial consumers were paying Rs8.55 per unit in extra cost to pick the subsidies.
Punjab-based DISCOs were over-billing the consumers by over Rs100 billion every year to show higher recoveries and lower losses, revealed the secretary power.
Out of 10 firms, four companies, Multan Electric Power Company, Faisalabad Electricity Supply Company, Lahore Electricity Supply Company and Gujranwala Electric Power Company are based in Punjab.
Read: ‘Zero-tolerance policy for electricity theft’
The interim government had planned to hand over DISCOs to provinces. But the secretary power said that the plan had been shelved and now their privatisation was the only viable solution.
He said that due to factors like low electricity consumption, foreign-funded power plants, lack of competition for setting up these plants and exchange rate volatility, the consumers were paying Rs2 trillion in capacity payments, or over Rs21 per unit.
The capacity payments will further increase to Rs2.2 trillion in the next fiscal year, a sum that is Rs203 billion higher than this fiscal year, according to a presentation that the secretary gave to the media.
One of the reasons for higher capacity payments is the low level of industrialisation, expensive Chinese financing for power plants and lack of competition at the time of setting up China-Pakistan Economic Corridor (CPEC) energy projects, said Langrial.
He added that influential businesses had hijacked Pakistan’s economic policies in the past, restricting competition and the entry of new players. Had Pakistan matched the Indian level of industrialisation, the electricity prices could have been lower by Rs7 per unit than today’s tariffs, said the secretary.
He pointed out that Pakistan’s power plants were not mostly locally funded, which contributed to higher prices of electricity.
The secretary added that federal and Punjab governments set up four LNG-fired power plants of nearly 4,700 megawatts that had only Rs87 billion in capacity payments this year.
Compared to these government-funded plants, foreign-funded coal-based plants of 6,800MW would get Rs262 billion in capacity payments, he added.
“Because of no competition and foreign financing, we are now paying many times more electricity prices than these should have been in case of plants being set up through open competition and with local financing,” he said.
The secretary candidly admitted that there were no short-term solutions to the current high electricity prices and it would take a much longer time to bring the cost down.
He said that the government’s anti-theft campaign had so far yielded savings of Rs63.6 billion on account of cash recoveries and less theft of electricity. He hoped that the campaign would continue even after elections.
The 10 public sector DISCOs are causing nearly Rs890 billion in annual losses on account of theft, less recovery of electricity bills and technical losses over and above the Nepra-determined limit, said the secretary.
He said that the annual cost of theft was Rs201 billion and another Rs387 billion was lost because of less recoveries. The Rs589-billion cost of inefficiencies of power distribution is exclusive of technical losses, said Langrial.
There are 11.5% of technical losses that translated into over Rs300 billion but were transferred to the consumers through power tariffs, he said.
The secretary power said that power sector’s liabilities stood at Rs3.5 trillion for the current fiscal year as against estimated revenue of Rs2.5 trillion, resulting in a gap of Rs976 billion.
Published in The Express Tribune, December 5th, 2023.
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