New condition: IMF wants power outages linked to recoveries
Gives Pakistan until end of January to implement the condition for $6.7bn bailout package.
Discos will get their electricity quotas as usual but the areas generating less revenue will be subjected to more outages. The government will soon issue guidelines to Discos to link load-shedding with recoveries. PHOTO: FILE
ISLAMABAD:
The International Monetary Fund (IMF) has called for linking the frequency and duration of power outages across Pakistan to the recovery of bills. This, the international lender believes, will discourage rampant power theft and non-payment culture in the country.
Increasing power pilferage and non-payment of bills adds to the ‘circular debt’, which eats up the scarce public resources.
Sources familiar with the recent talks between the IMF and Pakistan told The Express Tribune that the international financial institution has added a new structural benchmark in the $6.7 billion bailout programme. According to which, the government will link the load-shedding duration with the revenues a power distribution company (Disco) collects on account of electricity bills.
The government has been asked to implement this before end of January 2014, sources added. Discos will be responsible for identifying areas for higher load-shedding, based on the recoveries from each small circle and division.
Discos will get their electricity quotas as usual but the areas generating less revenue will be subjected to more outages. The government will soon issue guidelines to Discos to link load-shedding with recoveries.
The Karachi Electricity Supply Company (KESC) is successfully implementing this model while the government has also introduced it in two cities where the recovery rate was on the decline. In Bannu, the government has ordered an increase in the frequency and duration of outages as compared to the other jurisdictions of the Peshawar Electric Supply Company (PESCO).
Pakistan and the IMF concluded the first review of the three-year bailout programme on November 8, paving the way for the approval of a second tranche of about $550 million by the Fund’s Executive Board by third week of December.
Currently, the federal government is only recognising subsidy on account of difference between the determined and notified end-consumer tariff. The difference between the tariffs determined by the National Electric Power Regulatory Authority (NEPRA) is Rs3.11 per unit higher than what the government is charging the consumers, according to an official of the Water and Power Ministry (MOWP).
For this purpose, the finance ministry has earmarked Rs240 billion power subsidy in the current fiscal year. However, the losses on account of theft and less recovery are not budgeted at present, which is again adding to the circular debt even though the government paid Rs480 billion dues in June-July.
The official said that barring the current arrears, which are to the tune of Rs40 billion, the circular debt again swelled to Rs95 billion till end of October.
At present, NEPRA is allowing Discos to recover 16.5% losses from consumers but the MOWP has allowed 22% losses and the difference between both is being added into the circular debt.
After the recent hike in power tariffs, the recovery ratio has significantly plunged underscoring that increase in rates was causing more theft.
The government has already linked load-shedding duration with the recoveries in the jurisdictions of Peshawar and Multan distribution companies, said MOWP spokesperson Zargham Ehsaq Khan.
He added that during the first quarter of the current fiscal year, the average recovery rate at the distribution level remained 82% while it dipped to 77% at the level of Central Power Purchasing Agency (CPPA).
In Balochistan, the recovery rate in September stood at less than 64%, said Khan. In Hyderabad, it was 78%, in Peshawar, 82%, in Multan, 86.6%, and in Islamabad and Lahore, the recovery rate was 89%, he added.
However, there is an underlying risk that the corrupt elements in the distribution companies may disturb the arrangement in return for kickbacks. Khan said the government was establishing a centralised load-shedding evaluation mechanism to address such complaints.
Published in The Express Tribune, November 19th, 2013.
The International Monetary Fund (IMF) has called for linking the frequency and duration of power outages across Pakistan to the recovery of bills. This, the international lender believes, will discourage rampant power theft and non-payment culture in the country.
Increasing power pilferage and non-payment of bills adds to the ‘circular debt’, which eats up the scarce public resources.
Sources familiar with the recent talks between the IMF and Pakistan told The Express Tribune that the international financial institution has added a new structural benchmark in the $6.7 billion bailout programme. According to which, the government will link the load-shedding duration with the revenues a power distribution company (Disco) collects on account of electricity bills.
The government has been asked to implement this before end of January 2014, sources added. Discos will be responsible for identifying areas for higher load-shedding, based on the recoveries from each small circle and division.
Discos will get their electricity quotas as usual but the areas generating less revenue will be subjected to more outages. The government will soon issue guidelines to Discos to link load-shedding with recoveries.
The Karachi Electricity Supply Company (KESC) is successfully implementing this model while the government has also introduced it in two cities where the recovery rate was on the decline. In Bannu, the government has ordered an increase in the frequency and duration of outages as compared to the other jurisdictions of the Peshawar Electric Supply Company (PESCO).
Pakistan and the IMF concluded the first review of the three-year bailout programme on November 8, paving the way for the approval of a second tranche of about $550 million by the Fund’s Executive Board by third week of December.
Currently, the federal government is only recognising subsidy on account of difference between the determined and notified end-consumer tariff. The difference between the tariffs determined by the National Electric Power Regulatory Authority (NEPRA) is Rs3.11 per unit higher than what the government is charging the consumers, according to an official of the Water and Power Ministry (MOWP).
For this purpose, the finance ministry has earmarked Rs240 billion power subsidy in the current fiscal year. However, the losses on account of theft and less recovery are not budgeted at present, which is again adding to the circular debt even though the government paid Rs480 billion dues in June-July.
The official said that barring the current arrears, which are to the tune of Rs40 billion, the circular debt again swelled to Rs95 billion till end of October.
At present, NEPRA is allowing Discos to recover 16.5% losses from consumers but the MOWP has allowed 22% losses and the difference between both is being added into the circular debt.
After the recent hike in power tariffs, the recovery ratio has significantly plunged underscoring that increase in rates was causing more theft.
The government has already linked load-shedding duration with the recoveries in the jurisdictions of Peshawar and Multan distribution companies, said MOWP spokesperson Zargham Ehsaq Khan.
He added that during the first quarter of the current fiscal year, the average recovery rate at the distribution level remained 82% while it dipped to 77% at the level of Central Power Purchasing Agency (CPPA).
In Balochistan, the recovery rate in September stood at less than 64%, said Khan. In Hyderabad, it was 78%, in Peshawar, 82%, in Multan, 86.6%, and in Islamabad and Lahore, the recovery rate was 89%, he added.
However, there is an underlying risk that the corrupt elements in the distribution companies may disturb the arrangement in return for kickbacks. Khan said the government was establishing a centralised load-shedding evaluation mechanism to address such complaints.
Published in The Express Tribune, November 19th, 2013.