ISLAMABAD: The government on Wednesday decided to charge the power consumers the cost of about three per cent additional technical losses and interest on power sector loans through an average of Rs2.35 per unit impact in power tariff.
The crucial decisions were taken at a meeting of the Economic Coordination Committee (ECC) of the cabinet presided over by Finance Minister Ishaq Dar to honour a commitment given to the International Monetary Fund (IMF).
Both the moves were earlier rejected by the National Electric Power Regulatory Authority (Nepra) in different petitions and requests from the Ministry of Water and Power and the distribution companies (Discos).
“The ECC also considered and approved a summary of Ministry of Water and Power for issuance of policy guidelines to Nepra to incorporate debt servicing on actual basis in revenue requirements of Discos which would be adjusted in tariff of Discos on annual basis,” said an official statement.
An official explained that about Rs147 billion worth of additional loans and syndicated term finance certificates contracted over the past couple of years by the government or on its sovereign guarantees would be financed through inclusion of interest payments in the consumer tariff. The debt servicing cost on this account was estimated at about Rs10bn.
A previous dispensation of similar debt stock of about Rs306bn taken over by the federal government a few years ago was made part of the federal budget but the government had given a commitment to the IMF to reduce power sector burden on budget and instead pass it on to consumers. In a related decision, “the ECC also approved the summary of the Ministry of Water and Power for issuance of policy guidelines to Nepra to rationalise T and D (transmission and dispatch) losses target of 12.82 per cent to 15.75 per cent” as had been done in the case of power tariff for 2012-13.
The distribution companies now claim that their T and D losses, known as technical losses, stood at 17.55pc for 2013-14.
A Nepra official said the federal government did not have the powers under the Nepra Act to issue policy guidelines on tariff standards and other benchmarks that become part of the tariff at any stage.
He said that section 31 of the Nepra Act empowered the federal government to issue policy guidelines to the extent of final consumer tariff on the basis of average tariff determined by the regulator for prudent revenue requirements of power companies.
He said Nepra had been gradually scaling down the impact of technical losses to consumers to provide reasonable time to power companies to improve efficiencies and control losses.
The Nepra official said the 12.82pc technical losses allowed to power companies for current year were based on revenue requirements of the power companies and in the light of December 2013 decision of the Supreme Court of Pakistan for reducing technical losses and resisting government advices inconsistent with Nepra Act and against consumer interests.
The Nepra official further said the regulator had held in various determinations that increase in borrowing was a direct result of non-recovery of bills by power companies from government departments and dishonest private consumers while losses were resulting out of mismanagement and inefficiencies for which honest consumers should not be burdened any more.
The ECC also approved allocation of gas from SARA and SURI gas fields located in district Ghotki, Sindh to GENCO-II (Jamshoro) at mutually agreed terms and conditions. The gas fields remain dormant due to lack of investment despite estimated gas reserves 14-15 BCF (billion cubic feet) that could be utilised with an investment of around $6-8 million.
The committee also approved re-allocation of low BTU gas from Bahu gas field to Fauji Kabirawala Power Company Limited (FKPCL) until October 2029 to ensure its smooth operations and avoid conversion of the project to any expensive alternate liquid fuel.
The committee also approved transfer of tax exemption given to PSA-Gwadar Pte Limited (of Singapore) as per ECC decision of February 2007 to China Overseas Ports Holding Company Limited for the remaining period of the term.
The ECC also approved the summary of Revenue Division for exemption from income tax to profits and gains derived by coal mining projects in Sindh supplying coal to power generation projects only
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