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NEPRA had allowed a raise of 11 paisas per unit in September last

Dec 03 - 09, 2001

The Water and Power Development Authority (WAPDA) has once again approached the government for a 10 per cent (37 paisas per unit) in electricity tariff from next month to enable it to effect part of its losses during the current financial year. The increase, if granted, will yield additional revenue of Rs.9.6 billion while the estimated losses for the year are over 35 billion.

The National Electric Power Regulatory Authority (NEPRA) had allowed a raise of 11 paisas per unit in Sep. last in view of the increase in the prices of furnace oil being used by WAPDA for thermal power generation. The furnace oil prices have increased to Rs.10,473 per tonne till September 16, as they were 9,735 on July 1. The regulator had also observed that net effect had increased the estimated fuel bill of Wapda from Rs. 71 billion to Rs.75 billion for the year 2001-2002. Keeping in view the furnace oil prices, Nepra had allowed Wapda to raise power tariff by 11 paisa per unit.

WAPDA however, rejected the increase allowed terming it too low to meet its financial needs. In a recent communication with the federal government, WAPDA expressed its displeasure over NEPRA attitude and demanded cancellation of its decision. WAPDA said that in its view 11 paisas per unit raise in the tariff was too low as compared to frequent increases in the prices of furnace oil.

Fully conscious of the fact that this argument is no more valid in view of two downward revisions of furnace oil prices during the last six weeks WAPDA has come out this time with a new argument. It needs a raise in tariff to offset its recurring losses.

While talking to newsmen in Islamabad last week, Chairman WAPDA, Lt.Gen. Zulfiqar Ali Khan said that the authority was incurring a loss of over Rs.35 billion annually and they were busy in the process of presentation at different level for a package of an equivalent amount from the government. These measures include purchase of low sulphur furnace oil (LSFO) from Attock Oil Refinery (ARL) and Parco from next month as this would bring the savings to Rs. 0.9 billion.

"ARL and Parco are ready to supply LSFO at reasonable rates, but the petroleum ministry advises them that LSFO should be given to Wapda at the rate of imported OIL," Zulfiqar said. He said that when the oil sector has been deregulated, why restrictions were applied on Wapda.

Wapda has also asked the government that additional gas, measuring 150 MMCFD, should be made available for thermal power stations from December. The utility could save Rs.3.2 billion if its request is implemented, he added. "If gas is made available to us, even today, we can absorb almost 50 million units gas without any modification of plants. Resultantly, we will import less furnace oil", Wapda chief said. The third measure, suggested by the utility, was that gas prices from Wapda should be charged at par with fertilizer industry, as the utility could save Rs. 3.8 billion.

Wapda has also suggested a compensation of Rs.1.2 billion on account of subsidy, provided to Federally Administrated Tribal Areas (Fata) and agriculture consumers of Balochistan. The fifth measure suggested by Wapda was the conversion of Cash Development Loan of Rs.15.5 billion into GoP equity.

"We paid Rs.22 billion to the federal government as cash development loans, during the previous year and fulfilled our obligations. They are demanding Rs. 24 billion during the next year". Wapda chief said he made it clear that these loans had been taken in the sixties and seventies, asking this liability should be waived off, as this was not the liability which the present administration picked up. This could be deferred or converted into equity. Wapda was of the view that the government should convert Rs.15.5 billion into equity, while the utility was ready to pay the remaining amount, he said.

"If the government takes all these steps, we will not need more than 10 per cent increase in the present tariff up to 30 June which we think is reasonable," he added, requesting not take it verbatim as this was one option.

Zulfiqar said that there could be other scenarios which may be worked out to meet the cash shortfall adding that if the government further reduced debt service, the proposed increase of 10 per cent in tariff could also be reduced.

Replying to a question, Wapda, chairman said that the utility's management paid high respect to Nepra's administration but as regulator, it imported England's scenario as model of tariff and imposed it in Pakistan, which was not realistic. It, is the responsibility of Nepra to watch the interest of both the consumers and the utility, balance the cost of fuel through different measures," he said.

While WAPDA was unhappy over the raise of 11 paisa allowed by NEPRA, general public and industrial & commercial consumers betterly criticised the increase in tariff after short intervals. This was the third increase allowed by NEPRA under automatic fuel adjustment mechanism during this year. It will be recalled that after the first revision in March under fuel-based adjustment, the furnace oil prices have continuously been on the decline, but the mechanism failed to give any benefit to the consumer. When the 12 paisa increase was allowed by Nepra under the new mechanism, the furnace oil prices in fact declined to Rs.11.770 per ton, in March this year compared to Rs.12,548 per ton in October 2000.

Even the current increase is quite unjustified as the prices have since fallen by Rs.1300 per ton, which hardly provide any justification for this decision.

WAPDA authorities should keep in mind that even the present tariff for electricity consumption is rather on the high side specially in view the present cost of production of the utility. Any further increase will compel the industrial and commercial consumer to opt for self generation while agriculturists may go for diesel operated tubewells. As far as domestic consumers are concerned, they are finding it difficult to pay their bills even at present rates. Any further increase in power tariff will create general unrest besides encouraging tendency to power theft which is already going on at a large scale. The line losses are still the highest and billion of rupees are an outstanding against high and powerful consumers.