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Investment activity in the country has already been stalled and further raise in the power tariff would add to the problem

From Shamim Ahmed Rizvi, Islamabad
Nov 27 - 03, 2000

WAPDA's fresh bid to further fleece the electricity consumers faced tough opposition even by other government agencies like Planning Division, Ministry of Finance, Commerce and Industries. WAPDA had to face this awkward situation when its fresh petition seeking an exorbitant increase of 51 paisas per unit in electricity rates for all types of consumers came up for hearing before National Electric Power Authority (NEPRA) in Islamabad last week.

The Water and Power Development Authority (WAPDA) had moved a petition before NEPRA a few weeks back asking for an increase of 31 paisas per unit. During its hearing, however, the authority revised its earlier petition now seeking an increase of 51 paisas per unit as the authority had in the meanwhile discovered that an increase of 31 paisas per unit was not sufficient to meet its growing needs.

Representatives from the Ministry of Commerce and Planning and Development Division pleaded before a Nepra Panel, that further increase in the power tariff would severely affect overall economic activity in the country.

On the opening day of the NEPRA public hearing WAPDA's top management had to face embarrassment when along with representatives from the general public and NGOs who participated in the Nepra proceedings as interveners, some of the federal ministries opposed WAPDA petition seeking to raise its power tariff.

The drama took such an unexpected turn that the General Manager (Finance) of the Authority, Javed Nizam had to intervene to tell the audience that the Authority was a government owned entity and not a private company. "It seems to me here that WAPDA is working in isolation. Let me tell you that WAPDA is a hundred per cent government-owned entity", Javed Nizam told the Nepra bench headed by Vice Chairman, Mansoor Elahi.

Chief Economist, Planning and Development Division, Dr. Pervez Tahir while presenting the official viewpoint of his Organization, said that investment activity in the country has already been stalled and further raise in the power tariff would add to the problem. He said overall economic activity in the country would remain sluggish if the investment remains blocked.

Dr. Pervez maintained that power tariff in Pakistan are related with the poverty, and raise in the tariff would automatically push up the poverty. He said poor lot in the country was already cutting down the food intake, and another hike in the power tariff would worsen this situation in a country where calorie-based poverty is on the rise.

Joint Secretary Commerce Division, Saeed Nazir said with the industrial power rates already too high, Pakistan was unable to compete other regional countries in the international export market. "Target of $10 billion export target is hard to achieve with such high power rates". He was of the view that industries all over the world get power on comparatively lower rates, but it was other way around in Pakistan "Under the TWO regime we have to support the competitiveness, and in the presence of such exaggerated power rates our industry is not in a position to compete with other Asian states", he added.

Saeed told the Nepra panel that his ministry would like to file a formal response to the WAPDA petition after detailed study of the proposed automatic tariff adjustment formula.

Chief (Power) at the Planning and Development Division, Ghulam Haider while taking a critical view of the efficiency of WAPDA thermal power plants said that most of WAPDA plants were lagging far behind their recorded capacity in terms of power generation. Citing Guddu and Jamshoro power plants as examples of WAPDA's poor performance, P&D Chief of the power wing said that the two plants were running on a minimal plant factor. He said recorded plant factor for Guddu station was 84 per cent while for Jamshoro it was 65 per cent. He told audience that Jamshoro was taking a load of less than 35 per cent.

While taking into account the WAPDA line losses, he said the Authority had promised to bring down its losses from 28 per cent to 22 per cent or even less than 20 per cent, but the situation on ground was quite disappointing. Moreover, he said WAPDA should concentrate on recoveries of its arrears of more than 60 billion rupees payable by the government departments and pass on its benefits to the consumer.

Earlier GM (Finance) WAPDA, Javed Nizam gave a detailed presentation to the Nepra panel seeking an immediate 51 paisa increase in its tariff and approval of its automatic power tariff adjustment formula to allow it to reflect adjustment in the international market price of the fuel oil in its power tariff. He said since the last tariff revision approved by Nepra, and made effective from July 1, 1999, the prices of fuel have undergone frequent upward revisions. WAPDA has been agitating for automatic Tariff Standards and Procedure Rule, 1998. ''Tariff shall be determined, modified or revised on the basis of and in accordance with the prescribed standards. Now based on latest discussions held under the chairmanship of Secretary General Finance in which both Ministry of Water and Power and Nepra were present, the WAPDA official said, the ECC decision to allow power utilities an automatic adjustment in consumer and tariff, necessitated on account of variation in pass through items like fuel price, as and when needed.

Mr. Nizam told a Nepra panel that WAPDA was being portrayed as a villain in the overall scenario, but nobody has ever questioned the Petroleum Minister's fixing of fuel price mechanism for WAPDA. "Economic ills of our country are also a major factor behind the unstable price structure for the power sector".

WAPDA General Manager, responding to the views expressed by the planning and development division representative, said the 1994 power policy allowed the Independent Power Producers to pass on the fuel price hike to its consumer, that is WAPDA. He said Planning Commission was part of the policy framing exercise, and did not object to this clause, but now it was giving a second thought. He said if a relief was offered to one power producer same should be extended to WAPDA as well. Moreover, he said Planning Commission also supported the deregulation policy of the Petroleum Ministry without taking into account that the international price index of the fuel oil would surely affect price structure in Pakistan.

He pointed out that the problem in fact was that WAPDA was being made scapegoat for all the other ills of economy which also play due role in exaggerated cost of power in the country. "Why the Petroleum Ministry and its distributing agencies are not being questioned as it was this ministry which had worked out the price mechanism for fuel oil, "Javed Nizam said.

He said it was due to this price mechanism that WAPDA was being charged more than 700 rupees per metric tonne extra on the imported fuel oil. He insisted that the Petroleum Ministry should be summoned to explain this policy. Nepra has not yet announced its decision but the sources revealed that the plea of automatic fuel adjustment in power tariff, if allowed, could reopen the issue of hydle power sharing agreed upon by the centre and the Provinces in 1992. There was also consensus that the fresh position of WAPDA seeking upward revision of tariff increase from 31 paisas to 51 paisas is unjustified as there has been no increase in the prices of fuel since August last. Furnace Oil prices were increased by some companies temporarily but they had to revert back to the oil prices after a few weeks.

If WAPDA's plea is accepted by the Nepra this will be the second raise in the electricity charges in a matter of about three months. Electricity and petroleum products have remained the major source of revenue generation for successive governments in the past, on one pretext or the other. At times, the previous governments squeezed inflated and advance electricity bills from the poor masses. The people expects some improvement in this culture of loot with the political change in the country, but there seems to be no let-up for the masses. With the emergence of the IPP units in the country, the pretext of the furnace oil prices has become too common to raise the electricity prices, in total disregard to the common man's plight due to overall economic pressures. Isn't strange that the WAPDA is still seeking raise in the electricity charges, in spite of the fact that a saving of over a billion dollars has been effected in its expenditure as a result of the reduction in IPPs tariff. WAPDA Chairman Lt. Gen Zulifiqar is on record with the boasts of profit, besides plugging the loopholes of financial irregularities and corruption. Ironically, the prices of oil in international market are being exploited by our governments to rob the people twice through raise in the petroleum prices and by increasing the electricity tariff. Rationally, there is no logic in WAPDA's demand for fresh raise, within three months since the power charges were reviewed upwards in September last. In any case, the 51 paisa per unit raise being demanded by WAPDA is totally unjustified and should be turned down by NEPRA straightway. We would, therefore, urge the government to restrain WAPDA from its unbridled tendency of fleecing the masses through unabated raise in the power charges. Any further increase in electricity tariff will be totally unbearable for the common man, who is already making his both ends meet with great difficulty.