Wapda arrears

The Water and Power Development Authority (Wapda) is an important public sector organisation, providing much needed energy to the industrial, commercial and domestic users of the country.
Without continuous flow of electricity from this giant organization, most of the economic activity in the country would come to a grinding halt and domestic consumers would face great inconvenience. However, despite its importance in the economic life of the country, its cash flow position has always been precarious due mainly to non-payment of its dues by consumers.
Wapda is presently reported to be struggling hard to recover its outstanding arrears of Rs 65.2 billion and has asked the government to clear the accumulated public sector energy dues. The Minister of Water and Power was recently given a detailed presentation regarding recovery of arrears from different federal and provincial departments and the minister is reported to have assured the Wapda officials he would take up the issue at the highest level.
On top of the list of defaulters are the domestic consumers of Federally Administered Tribal Areas (Fata). They owed Rs 48.9 billion to Wapda in November, 2005 as against Rs 44.7 billion in June, 2005 and collection rate from these consumers was only 0.1 percent. The Karachi Electric Supply Corporation (KESC) was the second biggest defaulter with an outstanding amount of Rs 4.1 billion but recovery rate from this organisation was at a reasonable level of 87.2 percent. The Government of Sindh with outstanding dues of Rs 2.5 billion stood third in the defaulters' list. The total outstanding amount against Federal Government departments, agencies and the department of defence was Rs 1.3 billion. The recovery rate from these defaulters was, however, encouraging at 92.2 percent. The outstanding amount against Agri Tube-wells in Balochistan was Rs 2.4 billion, while arrears of the government of Punjab were Rs 0.8 billion, NWFP Rs 0.7 billion and Balochistan Rs 0.8 billion.
Even a cursory look at the amount of arrears and recovery rate would reveal the source and the extent of problem. Wapda is supposed to be managed like a commercial organisation and to act in the same manner. The energy producing and distributing companies in the rest of the world do not only recoup their fixed and variable costs but also earn profits for their equity holders. The case of Wapda, on the other hand, is entirely different.
Its cash flow position is so poor that it has to rely constantly on government subsidy to meet its running and development expenditures. Obviously, the amount of arrears is too huge to be taken lightly and the main source of problem is Fata where both the level of outstanding dues and the recovery rate are highly discouraging, to say the least.
The irony is, that over the years, various governments have been unable to tackle the problem properly, preferring expediency over the rule of law and sound business practices. It is time that Fata consumers were given the message that enough is enough and they must pay for the electricity they used, failing which their supply would be discontinued like other households in the rest of the country.
Such a strategy would also lead to economy in consumption in Fata and larger supply of electricity to other areas of the country. In the meantime, Wapda should also continue its efforts for a higher recovery rate from other defaulters to bolster its financial position.
Wapda's inability and leniency of the government to recover outstanding dues are also creating an unfortunate perception about the writ of the government. It shows clearly that the government is either afraid of or not dealing properly with the defaulters and, on the other hand, punishing the law abiding ordinary consumers unnecessarily. There is also a moral aspect to this problem because losses of Wapda arising from non-payment in a certain region have to be met by raising the electricity rates and levying higher taxes in other regions of the country to meet the subsidy provided to it.
Privatisation of Wapda would also be difficult if this situation persists. Keeping in view all these factors, we would urge the government to devise a proper strategy aimed at providing a long-lasting and justifiable solution to the problem. The Fata residents, for instance, may be partly compensated for the loss of free electricity by allocating higher level of funds for social sectors and basic infrastructure in the region.