Plea to raise power tariff

According to a report in this newspaper the other day, the World Bank has advised the government to increase the power tariff for all types of consumers with a view to offsetting the losses incurred by the WAPDA due to the unabated rise in the prices of furnace oil over the last 8 months. It has been further pointed out by the World Bank that consequent upon the fall in water levels in the dams, WAPDA's hydro-generation capacity has received a severe setback, thereby making the utility increasingly dependent on thermal power generation.
At the same time power purchases by WAPDA from the IPPs have also substantially increased. As an unrealistically high purchase price was conceded to the private power producers, its adverse impact on WAPDA's financial position has always been a source of concern.
The utility has been managing its financial position by adjusting low-cost hydropower to the total cost including the cost involving purchases from the IPPs, and the average cost provides the basis for the fixation of power tariff for its consumers.
Now, in the wake of the fallen-off share of low-cost hydropower, WAPDA's unit cost has naturally increased quite substantially. In consequence, the present tariff structure for consumers has also been rendered impracticable, indicating the need for upward revisions in order to fully cover WAPDA's average unit cost.
WAPDA's deficit on account of its higher unit cost over the last 8 months is estimated at Rs 24 billion which is likely to further swell in case no upward revision in tariff is effected in the coming months. That a timely move has not been made by the government to increase the power tariff in keeping with the recent historic rise in oil prices in the international market, is attributed to on-going differences between the Power Ministry and NEPRA.
The government would also not like power consumers to be burdened with additional charges in view of the fact that the common people are already facing a rising tendency in the prices of consumers goods and the inflation rate is running high at 9 percent.
Moreover, the industrial sector is complaining about the high cost of power in the country as compared to other countries in the region which are competing with Pakistan on the export front specially in textiles.
Meanwhile, a number of distribution companies (DISCOS) have raised voices against determination of their tariff rates by NEPRA recently. They have approached the government to get their power tariff suitably revised upwards by NEPRA.
Another factor which has been affecting WAPDA's financial position adversely is the subsidy in power rates having been allowed to a number of sectors and regions for one reason or the other.
For instance not only FATA and PATA consumers enjoy subsidy in power rates but still they do not pay their power bills despite persistent efforts by WAPDA staff.
The World Bank has also reportedly pinpointed the need for the finalisation of a firm policy by the government to decide about the continuation or otherwise of the subsidy. Pending a decision on this issue, WAPDA would continue to face an uphill task in the adjustment of its cost and expenditure.
The World Bank has appropriately advised the government that grants/subsidy may be utilised for the extension of electricity installations and transmission lines into far flung rural areas of the country. It has also rightly pointed out that in the event of losses and inadequate earnings by WAPDA and distribution companies, the expansion programme in the energy sector would suffer a setback. The extension of transmission lines by DISCOS in different areas would naturally involve sizeable investments.
According to a rough estimate the development of a new distribution network for power supply over the next five years up to 2009 would involve an investment of Rs 96 billion, besides the cost of construction of transmission lines. There can be no two opinions that power utilities must be assured of profitability in their operations, in the absence of which, no private investor would be attracted to this sector. It may, however, be emphasised here that the rise in cost structure does not mean that it should be covered by chasing the upward increases in power tariff.
The efforts to reduce cost structure must necessarily include maximum improvement in the efficiency of management both in administration and operational cost control in addition to minimising losses through leakage in transmission, besides theft of energy.