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WAPDA needs Rs. 40bn

WAPDA has suggested six alternatives if the cash package is not made available.

Sep 24 - 30, 2001

After having failed to convince the National Electric Power Regulatory Authority (NEPRA) that a further raise in power was justified, the water and power development authority (WAPDA) has now sought a Rs.40 billion cash package from the federal government to offset its deficit for the current financial year, sources in the Finance Ministry revealed to this correspondent.

WAPDA, which has directly approached the Chief Executive Secretariat has suggested six alternatives if the cash package is not made available including a 32 paisa increase in the existing electricity rates.

The utility has apprised the Chief Executive Secretariat that at present the Kot Addu Power Company (Kapco) is purchasing imported furnace oil with low sulphur (LSFO) content from Pakistan State Oil (PSO). Attock Oil Refinery (ARL) has a low content of sulphur, however, the price of the furnace oil produced at ARL is at present equivalent to the price of HSFO sold to PSO.

WAPDA, in communications with the Chief Executive Secretariat, has said that if the required quantity of furnace oil used in power generation was made available to Kapco from ARL and also Pakistan Railways commits to transport the same from Attock to the Lalpir depot, the utility would save Rs.3,000 per metric tonne. This would bring savings to the tune of two billion rupees on account of energy payments by WAPDA to Kapco.

The utility said the various gas consumption of WAPDA plants located in the northern zone is 400 MMCFD, but the average gas supply on these plants is approximately 250 MMCFD. Therefore, additional gas measuring 150 MMCFD could be consumed at the WAPDA thermal power plants. Guddu power plant could also consume additional 100 MMCFD gas. If gas is made available to WAPDA thermal power to the extent of 250 MMCFD, cash saving of Rs. 9.2 billion can be achieved. However, the utility has asked the Chief Executive Secretariat that direction may be issued to the concerned ministry for necessary measures in this regard.

The third measure, which was suggested by WAPDA, was that gas prices from WAPDA should be charged at par with fertiliser industry as WAPDA could save Rs. 6.9 billion on this account. WAPDA has also suggested a compensation of Rs. 2 billion on account of the subsidy being provided to the Federally Administered Tribal Areas (Fata) and the agriculture consumers of Balochistan.

The fifth measure suggested by the utility was the conversion of its Cash Development Loan (CDL) of Rs. 4.3 billion into the government of Pakistan's (GoP) equity. The sixth and main demand of the utility was raise of 32 paisa per unit in the existing tariff from July last as this step could provide a relief of Rs. 14.9 billion to the utility.

On the other hand WAPDA Chairman Lt. Gen. Zulfiqar Ali Khan, in a public address, boasted that WAPDA has earned Rs.176 billion in the previous fiscal year while it has saved Rs.27 billion through cut in line losses during the last 30 months. "WAPDA has earned an income of Rs.176 billion during 2000-01 against the target of Rs.163 billion" he said while inaugurating 132 KV Bhagwal grid station, some 33 kilometers from Chakwal.

Gen. Zulfiqar said, the present administration started with the annual revenue of Rs. 92 billion in the year 1998-99. In the subsequent years, it continued to rise and last year, the Authority earned Rs. 176 billion, showing an increase of 80 per cent revenue in the last 30 months. Similarly, he said, 30 months ago the line losses crept to 42 per cent which was gradually brought down and in the previous fiscal year it was registered at 25 per cent. It is a big achievement as one per cent of line loss translates into Rs. 1.6 billion," he said

Gen. Zulfiqar said a total of 35,000 kilometers long high-powered transmission line was laid in the last 30 months which is a record in the WAPDA's history. Likewise, he said, 18 per cent new consumers have been brought into the WAPDA's net "which is a very high ratio by any standard when compared with the past ratio."

Later, talking to reporters, the WAPDA Chief dismissed assertion of any substantial increase in power rates. In May, 1999 he said the electricity rates were Rs. 3.48 per unit which today stands at Rs.3.57 per unit. "It is despite the fact that prices of furnace oil, the major input, has gone up by 140 per cent since then, besides raise in the gas rates." He said the raise in per unit cost is due to levy of 15 per cent General Sales Tax and Withholding Tax by the government.

"Last year, we paid Rs. 32 billion to the Central Board of Revenue (CBR)", the WAPDA chief said and added his organisation has submitted a number of recommendations to the government to bring down the electricity prices. These include a complete deregulation of furnace oil import and supply of additional gas to the WAPDA.

WAPDA, is the largest consumer of the furnace oil and last year it bought 1.5 million tonnes of oil. Similarly, it has the capacity of using an additional 250 million cubic feet of gas, he said adding "gas prices have gone high but if WAPDA is given gas at the subsidised rates, as in the case of fertilizer, the power rates can be brought down".

WAPDA was paying Rs.26 billion to the government as interest on the past liabilities and "if it is deferred and coupled with improving efficiency, the power rates can be reduced despite hike in prices of furnace oil", he added.

Despite all these boastful claims of the Chairman the fact remains that financial position is far from satisfactory. The troubles faced by WAPDA due mainly to its weak financial position appear to be assuming serious dimensions. The utility is urgently in need of Rs.40 billion as a loan or some sort of financial assistance from the federal government not only to meet its immediate payment liabilities to its creditors but also to initiate new development projects especially in the hydroelectric generation sector. The precarious financial position of WAPDA may be rather surprising for many, when judged in the light of the recent claim by its chairman about wide-ranging improvements in the Wapda's performance over the last two years since the takeover of the management by the army.

The fact, however, remains that WAPDA is not well financially. One of the causes of the financial ailment, as stated by the chairman, was the recent refusals by National Electric Power Regulatory Authority (Nepra) to allow a raise to WAPDA in power tariffs for various types of consumers. The WAPDA chairman is also reported to have requested the visiting IMF mission to exert pressure on the federal government and the Nepra to yield to its request for at least 32 paisa increase in per unit tariff. It is regrettable that while various sections of the society are vehemently opposing the pressures from the donor agencies for multifarious purposes, WAPDA is trying to use the IMF level to get its demand fulfilled.

The conclusion that one draws from the WAPDA episode is that merely changing one set of managements personnel for another is not what is needed. What matters is the fairness and uniformity of policies and transparency, openness and accountability in procedure. What ails WAPDA is the discriminatory determination of tariff, partial treatment reserved for certain influential groups of consumers, allowing them to accumulate arrears and then writing these off of one contrived ground or another, lax enforcement of discipline among the employees and indifference towards the service delivery system. In short, the utility is a commercial organisation but it is not being run on sound commercial principles focusing always on efficiency, profit and customer satisfaction and unless that is done WAPDA will remain as inefficiently run and insolvent an organisation as it has been all these years.