Increasing burden: Consumers to pay for line losses, circular debt
An extra burden of over Rs100 billion annually put on consumers.
An extra burden of over Rs100 billion annually put on consumers. PHOTO: FILE
ISLAMABAD:
The federal government on Wednesday approved fresh guidelines for the power sector regulator, asking it to recover the cost of inefficiency of power transmission and distribution companies (Discos), and circular debt from consumers, putting an extra burden of over Rs100 billion annually on them.
Both the decisions will result in increase in electricity tariffs from 12% to 15%, according to officials. The decisions to these effects were taken by Economic Coordination Committee (ECC) of the Cabinet, headed by Finance Minister Ishaq Dar.
ECC approved guidelines for National Electric Power Regulatory Authority (Nepra) for rationalising the transmission and distribution losses. It asked Nepra to allow Discos to claim 15.75% losses as against the current limit of 12.82%, a handout of the Ministry of Finance stated.
This will put an additional burden of at least Rs30 billion on consumers for something they are not responsible for.
The decision is tantamount to promoting bad governance and encouraging inefficiency in power distribution companies, said Shahid Sattar, former Member Energy of Planning Commission.
Discos claimed transmission and distribution losses of 17.55% for the year 2013-14, according to a handout issued by Ministry of Finance. It added in the last one year, the government improved recovery and contained line losses up to 2% and will continue to make progress in this regard.
The ECC also approved a summary of the Ministry of Water and Power for issuing policy guidelines to Nepra to incorporate debt servicing on an actual basis in revenue requirements of Discos, which would be adjusted in the latter’s tariffs on annual basis, according to the Ministry of Finance.
The decision was taken to recover the circular debt from the consumers who pay their bills. The officials said the move will result in the recovery of Rs80 billion to Rs100 billion per annum from consumers, translating into minimum 8% increase in tariffs.
Sattar said the previous government too tried to give such guidelines to Nepra but the regulator refused to accept such guidelines at the time since it found them inappropriate.
The process of recovering circular debt from consumers has already begun after ECC in its last meeting allowed the Ministry of Water and Power to raise Rs31 billion from commercial markets to pay off the debt and recover the interest and the principal amount from consumers.
Pakistan Power Holding Company, a subsidiary of the Ministry of Water and Power, would raise the money from a consortium of commercial banks, led by National Bank of Pakistan. The money will be borrowed at an interest rate of Karachi Interbank Offered Rate (Kibor) plus 1%.
ECC also approved a summary for re-allocation of low BTU gas from Bahu gas field to Fauji Kabirawala power company limited (FKPCL).
Published in The Express Tribune, May 29th, 2014.
The federal government on Wednesday approved fresh guidelines for the power sector regulator, asking it to recover the cost of inefficiency of power transmission and distribution companies (Discos), and circular debt from consumers, putting an extra burden of over Rs100 billion annually on them.
Both the decisions will result in increase in electricity tariffs from 12% to 15%, according to officials. The decisions to these effects were taken by Economic Coordination Committee (ECC) of the Cabinet, headed by Finance Minister Ishaq Dar.
ECC approved guidelines for National Electric Power Regulatory Authority (Nepra) for rationalising the transmission and distribution losses. It asked Nepra to allow Discos to claim 15.75% losses as against the current limit of 12.82%, a handout of the Ministry of Finance stated.
This will put an additional burden of at least Rs30 billion on consumers for something they are not responsible for.
The decision is tantamount to promoting bad governance and encouraging inefficiency in power distribution companies, said Shahid Sattar, former Member Energy of Planning Commission.
Discos claimed transmission and distribution losses of 17.55% for the year 2013-14, according to a handout issued by Ministry of Finance. It added in the last one year, the government improved recovery and contained line losses up to 2% and will continue to make progress in this regard.
The ECC also approved a summary of the Ministry of Water and Power for issuing policy guidelines to Nepra to incorporate debt servicing on an actual basis in revenue requirements of Discos, which would be adjusted in the latter’s tariffs on annual basis, according to the Ministry of Finance.
The decision was taken to recover the circular debt from the consumers who pay their bills. The officials said the move will result in the recovery of Rs80 billion to Rs100 billion per annum from consumers, translating into minimum 8% increase in tariffs.
Sattar said the previous government too tried to give such guidelines to Nepra but the regulator refused to accept such guidelines at the time since it found them inappropriate.
The process of recovering circular debt from consumers has already begun after ECC in its last meeting allowed the Ministry of Water and Power to raise Rs31 billion from commercial markets to pay off the debt and recover the interest and the principal amount from consumers.
Pakistan Power Holding Company, a subsidiary of the Ministry of Water and Power, would raise the money from a consortium of commercial banks, led by National Bank of Pakistan. The money will be borrowed at an interest rate of Karachi Interbank Offered Rate (Kibor) plus 1%.
ECC also approved a summary for re-allocation of low BTU gas from Bahu gas field to Fauji Kabirawala power company limited (FKPCL).
Published in The Express Tribune, May 29th, 2014.