Wapda's request for another raise

About a week after being allowed by Nepra to increase its hydroelectric tariff by 36.65 paisa per unit for the year 2007-08, Wapda has made a representation to the government for raising its consumer tariff so as to improve its financial health, says a Recorder Report.
In a letter written to the Finance Secretary (a copy of which has been made available to this paper), Wapda has sought rationalisation of consumer-end electricity tariff or the authorisation for automatic adjustment on quarterly basis, to improve the utility's financial health and to reduce the burden on the government.
Because of the rising trend of furnace/diesel oil dependence for thermal energy, rather than hydel energy for meeting the annual growth demand of 10 percent, the utility's financial burden is bound to increase unless shifted to consumers, argues Wapda's representation.
According to the letter, the consumer-end tariff remained stagnant from November 2003 to February 2007, while the cost of electricity went up by 39 percent during this period, and the Nepra tariff, determined in February 2007, increased by only 32 percent.
Out of this, 10 percent has been passed on to consumers while 22 percent has been assumed by the government by way of a subsidy. Further, the utility has argued that Kesc is not paying according to the Nepra-determined rate of tariff, and the amount due from it has gone up to Rs 20 billion, while Fata's outstanding bills have increased to Rs 63 billion.
Moreover, the supply by gas companies has undergone a 40 percent reduction as compared to last year, as a result of which more oil has proportionally had to be used.
Wapda has also proposed reduction in the capital expenditures of each Disco by 10 percent, taking the previous year as the benchmark. In its last representation, Wapda had requested for a tariff indexation mechanism to meet the changing needs of the utility, instead of having to file a fresh petition each year.
We believe that Wapda's request to be allowed to make "automatic adjustment on a quarterly basis to improve the utility's financial health and reduce the burden on the GoP," if accepted, will spell a bigger problem for competitiveness of our industrial production and exports, and cause more hardship for the general consumers than what the fortnightly "adjustment" in petrol/diesel prices has done for our public transport sector.
It will be recalled that Wapda's request for tariff indexation mechanism was turned down by the regulator on the ground that there was no justification for such a mechanism.
As we have argued in this space earlier, the country's energy crisis has essentially stemmed from our failure to tap our inexhaustible hydro energy potential, which is said to be over 42,000 megawatts. Similarly, our coal energy potential could put us at par with some of the leading oil-producing countries of the world.
Meanwhile, Pakistan's energy needs have been growing at a rate of around 10 percent per annum. And it has been calculated that 1200 to 1400 megawatts of additional electricity will be needed by 2008 to sustain the high growth trajectory set by the government.
(The current demand of electricity in the country stands at 15,476 megawatts, while its availability is 14,498 megawatts). Further, based on its present generation capacity, the country's hydel-thermal mix stands at 34:66, which is almost the reverse of an ideal hydel-thermal mix of 70:30. Because of this aberration, the country's power shortages are being largely met through thermal power rather than the cheaper hydel alternative, and most of the hydel projects have not been completed, as scheduled.
Therefore, over-dependence on the expensive thermal option, born of our failure to tap the country's abundant hydroelectric potential (for whatever reasons) has led to a drastic increase in power tariff, which in turn has eroded the competitiveness of our exports.
The oil price hike in international market has created serious difficulties for our economy, as the country's oil import bill has shot up to $5-6 billion, while its trade deficit has reportedly crossed the $12 billion mark. However, Wapda cannot be held entirely responsible for the current energy crunch, as there has been a huge increase in the country's electricity consumption.
This is apparent from the fact some 750,000 air-conditioners have been installed in the last few years, apart from a mushroom growth in the use of other energy-heavy electrical appliances. In addition, as many as 13,000 villages were electrified in 2006, while some 30,000 tubewell connections have been given so far in 2007. All this has obviously put pressure on Wapda's electricity generating capacity.
There is an urgent need for Wapda to execute its Vision 2025 water and power projects on a fast track basis, so as to minimise reliance on the prohibitively expensive thermal option. Secondly, while the government has already arranged a hefty bailout package of Rs 30.9 billion for Wapda, another increase in consumer tariff will burden all types of consumers, thereby further eroding the competitiveness of our industrial production.
Thirdly, there is a need for Wapda to further curtail its line losses and power theft. And, we may add in all sincerity, it should try to do some belt-tightening as well, where possible. It is not the press's role to engage in partisan point-scoring, but to present, in a constructive spirit, an objective evaluation of the performance of government departments and agencies, as indeed of all national institutions on which depends the country's long-term security, progress and prosperity.