Massive surge in electricity prices from next month
The government will bridge the gap between the cost of generating electricity and end-consumer prices.
ISLAMABAD:
The first dose in this exercise will be delivered next month.
Deputy Chairman Planning Commission Dr Nadeem Ul Haque, the man leading the reforms, on Tuesday unveiled the broader contours for overhauling the bleeding energy sector. The total price difference has been worked out in the range of Rs210-225 billion for the current financial year.
He was speaking at the second day of a two-day workshop on power sector reforms organised to outline the upcoming measures to clean the energy sector of debt and inefficiencies.
“The (power sector) business plan needs to be consistent with the allocated Rs30 billion subsidy,” he said, hinting at recovering the remaining Rs180 billion primarily from consumers.
Haque, however, was reluctant to share by how much the tariff would actually be increased. “This time, the priority would be on improving efficiency rather than on increasing tariffs,” he said. “Change the culture, learn to provide uninterrupted services and learn to pay for services.”
It must be noted that, so far, the government has failed in the attempts to improve the efficiency of power distribution companies.
“A one per cent tariff increase amounts to approximately Rs6.2 billion and the government has to increase the prices by at least 28 to 30 per cent within a year if it again fails to turn around the loss-making power distribution companies,” said a key official of the finance ministry who deals with public sector enterprises.
The government has embarked on a plan to overhaul the power sector by rationalising electricity tariffs, restructuring power distribution companies and privatising the state-owned distribution companies. The plan has largely been prepared and financed by international donors.
During last year, power sector losses were estimated at Rs250 billion. However, the government has been increasing the prices but failed to reduce losses which have surged to 30 per cent, almost equivalent to the cost it would recover through increasing prices. Over the past two years the tariffs have been increased by 70 per cent.
Under the plan for reform, the deputy chairman said that from next month the National Electric Power Regulatory Authority (Nepra) would issue all withheld notifications on account of monthly fuel adjustments, a step towards increasing tariffs. Currently, Nepra determines the tariff but is notified by the government. The donors have been pushing the government to authorise Nepra for notifying the tariffs, as the government’s indecision turns into piling up of billions of rupees in subsidies.
Experts, mostly working with multilateral donors and dealing with issues related to power distribution companies, took part in the conference and proposed a reforms agenda backed by the donors.
They suggested an increase in power tariffs, change in methodology of tariff determination, transferring assets in the name of power distribution companies aimed at selling them or using them as collateral to acquire loans and reviewing existing laws, labelled ‘outdated’.
Published in The Express Tribune, October 6th, 2010.
The first dose in this exercise will be delivered next month.
Deputy Chairman Planning Commission Dr Nadeem Ul Haque, the man leading the reforms, on Tuesday unveiled the broader contours for overhauling the bleeding energy sector. The total price difference has been worked out in the range of Rs210-225 billion for the current financial year.
He was speaking at the second day of a two-day workshop on power sector reforms organised to outline the upcoming measures to clean the energy sector of debt and inefficiencies.
“The (power sector) business plan needs to be consistent with the allocated Rs30 billion subsidy,” he said, hinting at recovering the remaining Rs180 billion primarily from consumers.
Haque, however, was reluctant to share by how much the tariff would actually be increased. “This time, the priority would be on improving efficiency rather than on increasing tariffs,” he said. “Change the culture, learn to provide uninterrupted services and learn to pay for services.”
It must be noted that, so far, the government has failed in the attempts to improve the efficiency of power distribution companies.
“A one per cent tariff increase amounts to approximately Rs6.2 billion and the government has to increase the prices by at least 28 to 30 per cent within a year if it again fails to turn around the loss-making power distribution companies,” said a key official of the finance ministry who deals with public sector enterprises.
The government has embarked on a plan to overhaul the power sector by rationalising electricity tariffs, restructuring power distribution companies and privatising the state-owned distribution companies. The plan has largely been prepared and financed by international donors.
During last year, power sector losses were estimated at Rs250 billion. However, the government has been increasing the prices but failed to reduce losses which have surged to 30 per cent, almost equivalent to the cost it would recover through increasing prices. Over the past two years the tariffs have been increased by 70 per cent.
Under the plan for reform, the deputy chairman said that from next month the National Electric Power Regulatory Authority (Nepra) would issue all withheld notifications on account of monthly fuel adjustments, a step towards increasing tariffs. Currently, Nepra determines the tariff but is notified by the government. The donors have been pushing the government to authorise Nepra for notifying the tariffs, as the government’s indecision turns into piling up of billions of rupees in subsidies.
Experts, mostly working with multilateral donors and dealing with issues related to power distribution companies, took part in the conference and proposed a reforms agenda backed by the donors.
They suggested an increase in power tariffs, change in methodology of tariff determination, transferring assets in the name of power distribution companies aimed at selling them or using them as collateral to acquire loans and reviewing existing laws, labelled ‘outdated’.
Published in The Express Tribune, October 6th, 2010.