RISE IN POWER TARIFFS
GOVT SHOULD REVISIT THE PRIVATISATION AGREEMENT WITH KESC
TARIQ AHMED SAEEDI
July 05 - 11, 2010
The new financial year has started with many bombshells for the common persons as well as businesspersons since economic agenda of this year revolves around taxes and removal of subsidies to up government incomes.
Raise in power tariffs was such a popularly disliking action not taken first time by the government.
National Electric Power Regulatory Authority allowed eight distribution companies and Karachi electric supply company to increase electricity tariffs by 7.6 percent from July 1, 2010 for all consumers while ignoring the unabated electricity load shedding.
Critics say the power regulator intentionally overlooks the hardships of power consumers while allowing rise in power tariffs. It permitted rise in power tariffs while electricity load shedding reaches to three to four hours a day in urban and suburban localities of the metropolis.
Its recent go-ahead to KESC to lift prices drew criticism from all walks of life. The life around the city is greatly affected by the shutdowns of power supply for one or tow hours. While only few can afford to switch to alternative power source, many have to endure mental torture inflicted on them by load shedding.
Local civil service organisations and industrialists from Karachi called Nepra in the dock to explain reasons behind such arbitrarily and uncalled-for permissions of rise in power tariff it gave to KESC. While Sindh High Court has stopped KESC to increase power tariffs till August 2010 in its judgment on 25th June, it remains to be seen whether or not the court gives final verdict in supplier's favour on next date of hearing. For the time being, the electricity consumers in Karachi have saved from double edged sword of power tariff as well as fuel adjustment charges from Re0.10 to Rs1.77 per unit.
7.6PC AND RS1.77
Notably, 7.6 percent is permissible for eight discos including KESC whilst fuel adjustment charges are allowed to latter only.
Nepra has allowed KESC to increase the tariff by Re0.10 to Rs1.77 per unit against the fuel adjustment charges from July 2009 to March 2010. The backdated levies will certainly swell up monthly electricity bills by manifold.
SHC judgment on 25th June reads: 'Stay Order against KESC tariff increase to be extended until August, 2010 - Fuel adjustment charges cannot be passed on to consumers from April, 2010 - The appointment of an independent power expert to verify Fuel Adjustment Surcharges as submitted by KESC to NEPRA.'
Some neutral observers of the battle between vivacious citizens and KESC say it would not be difficult for the company to come along with strong case next time since it has calculations, be they fudged, that underpin argument of rise in power tariffs.
Fuel cost shot substantially during the period and Nepra's favourable calculations are also tilted towards KESC's stance. According to Nepra's calculations, KESC incurred Rs1.22 billion through generating electricity from its power plants while Rs4.6 billion on purchase of power from independent power plants, Wapda, and other external sources during July 2009 to March 2010.
It is worthwhile to mention that the government disbursed Rs36 billion to the power supplier but according to the petitioner the benefits of subsidy has not been transferred to the electricity consumers.
Last year, Dr Kazi Ahmed Kamal along with some other concerned citizens filed a constitutional petition against KESC, sole electricity supplier to a city of 20 million population, and Nepra in the Sindh High Court for frequent rise in electricity tariffs and privatisation of KESC. He said the rise in power tariffs by KESC was based on miscalculations and manipulation of figures. The company passed on the cost of administration losses to consumers, he contended. 'This is blatant violations of ethical principles.'
The petition sought court's interference in to the noncompliance of KESC with its obligations in the privatisation agreement. The company did not spend money to revamp the decrepit distribution and transmission networks around the city. It is used to pass the buck on consumer whenever it has to compensate transmission and distribution losses.
Transmission and distribution losses of the company are estimated at 30 to 40 per cent, which is substantial when compared with current loads. The foreign origin management has not made considerable efforts despite being at the helms since almost two years, to reduce the line losses, which cling on the same rate. The company's representatives go overtly defensive on the question of investments, saying it spent millions of dollars on T&D. Is this T&D or TA/DA? Corporate culture in KESC is quite impressive and in contrast to its wilting infrastructure outward across the city. The company would spend money to decorate the offices and facilitate high-up visitations. It is strenuous and capital-intensive responsibility to light up the densely populated city and performance would be good if job is successful and not anything else, remarks a businessperson.
According to KESC, Nepra adjusts tariffs for variation in fuel and power purchase cost and change in fuel mix on a quarterly basis. A statement of the company said since July 2009 no tariff adjustment has been made. It said consumers in Karachi pay Rs0.77 (per unit) lower than consumers in other cities. Average applicable tariff per unit for electricity consumers in Karachi is Rs7.6, it said. The company said it is using furnace oil because of low gas supply. It called for more gas or furnace oil at gas equivalent price 'to keep the tariff at a reasonable level'.
People are least bothered about the rate increment by KESC earlier was for any kind of adjustment or not. The rise in tariffs for them means extra monthly bill. In view of electricity-less sweltering days, the bill invites nothing but rage. An enraged consumer said KESC must send a schedule attached with the monthly bill of next rises in pipeline.
Rise in power tariffs will not only unleash devil-may-care inflation but also stir up cost of industrial production that again adds to inflationary pressures. While condemning the decision, president Karachi Chamber of Commerce and Industry, Abdul Majid said back-to-back rise in power tariffs since last several months has put a risk on the survival of industries. It is time the government should work out low cost electricity solutions, which are not pipedream. Government should revisit the privatisation agreement with KESC.