IMF has asked the government to ensure implementation of automatic fuel adjustment formula

 21 - 27, 2003

The National Electric Power Regulatory Authority (NEPRA) has allowed WAPDA'S Distribution Companies to raise power tariff by 12 paisa per unit or 3 per cent.

Sources said, NEPRA has dispatched its determination to federal government for notification but the government has withheld it fearing opposition's reaction on the decision.

"Though NEPRA has allowed WAPDA to increase power rates as per Automatic Tariff Adjustment (ATA) formula, the government will not give any chance of blackmailing to opposition, which is already active on Iraq's issue," sources added.

Incidentally a cut of 12 paisas per unit in the charges was announced by the Prime Minister to the domestic consumer as a part of his special relief package to the people of Pakistan on assuming power. The IMF review team which visited Pakistan last month disliked the cut allowed and advised the government not to interfere in tariff fixation and management of WAPDA in order to ensure its economic health.

According to a source, the directive issued to the federal government by the IMF mission was on the complaint of WAPDA officials, in a review in meeting, that it was the federal government which on the one hand withheld increase in tariff as per automatic fuel adjustment formula and, on the other, did not extend help for the recovery of receivables from the public sector. "We are on target, except losses in two distribution companies (Discos) but prolonged delay in recovery of receivables amounting to Rs.33 billion from the public sector and hurdles in the implementation of NEPRA decision were the main reasons of distortion in Financial Improvement Plan (FIP) ," sources quoted WAPDA officials as saying in the meeting.

IMF has asked the government to ensure implementation of automatic fuel adjustment formula in real terms as WAPDA argued if NEPRA did not pass on the impact of fuel prices to the consumers, the utility's financial gap would definitely widen.

WAPDA also complained that it was lossing over Rs.12 billion annually in the tribal areas where power theft was rampant. It has launched a vigorous campaign of meter installation but was met with stiff resistance from the local tribal population including wealthy businessmen and traders who do not want to pay for the electricity consumption. The political administration seemed helpless. According to details, in more than 90 per cent Fata area, WAPDA failed to install electricity meters since 1947, as no one was willing to pay their electricity bills. It is interesting to note that the Fata areas comprised of 7.36 per cent of total NWFP population, but due to power theft there, the electricity consumed in the Fata areas is 25 per cent more than the electricity consumed in whole of the province, a source revealed.

After the presentation of WAPDA affairs to the Prime Minister by WAPDA Chairman and its top brass, Prime Minister Mir Zafarullah Khan Jamali constituted a two-member committee comprising Minister for Water and Power, Aftab Ahmad Khan Sherpao and Adviser on Finance, Shaukat Aziz, to resolve financial issues pertaining to WAPDA. WAPDA has complained that Finance Ministry always shelved proposals whether financial or others, which created hurdles in the smooth functioning of the utility.

The committee would meet soon to sort out the problems being faced by the utility as the Finance Minister was leaving for Washington to attend spring meeting of the International Monetary Fund (IMF). It is interesting to note that WAPDA did not formally invite the Minister for Water and Power, Aftab Ahmad Khan Sherpao and Secretary Water and Power, Riaz Ahmad Khan for the briefing. "Secretary WAPDA just wrote to the Ministry that WAPDA has arranged a briefing for the Prime Minister and if the Minister and Secretary want to attend the meeting they would come", a sources revealed.

According to the source the Ministry of Water and Power has taken serious notice of WAPDA's behaviour and sought explanation from the utility, saying "is this the way to invite the Minister or Secretary" Prime Minister also expressed displeasure over the performance of WAPDA and directed that losses should be curtailed to provide more efficient service to consumers and to run the utility on more professional lines. The Prime Minister said, being the premier organisation responsible for generation and distribution of power, WAPDA has major role in accelerating socioeconomic development.

The Prime Minister has also asked the authority to be more responsive in redressing the grievances of the people emphasising that the power-producing utility should strive for greater consumer satisfaction instead of merely increasing the rates. While the authority has been able to reduce its losses and increase its profits but being a major power generating and distributing organisation, it is expected to play still more active role in the country's socio-economic development.

The cost of energy is made up of two elements which include the cost of production and government taxes. Now at a time when the government has been attaching high priority to boost industrial and agricultural production, its overall energy policy should also be brought in line with that basic objective. That clearly points out to the need of reducing the cost of energy which is possible through improving the corporate efficiency of the utilities and also by reducing the taxes on electricity and gas consumption. As the domestic industrial sector will be open to some tough international competition two years down the road as a result of WTO regulations, the need for all such policy measures which will enable it to meet this challenge have become all the more compelling. The reduction in the cost of energy is one such critically important issue.