Electricity supply to AJK: FD to devise formula to release dues of 3 Discos: Nepra

ISLAMABAD: Finance Division (FD) is to devise a comprehensive formula to release over Rs150 billion outstanding receivables of three power Distribution Companies (Discos) against supply of electricity to Azad Jammu and Kashmir (AJ&K) territory, well informed sources in Nepra told Business Recorder.

Sharing the details, sources said electric power to territories under Azad Jammu & Kashmir (AJ&K) is being provided in bulk by three Distribution Companies (Discos), namely, Islamabad Electric Supply Company (Iesco), Peshawar Electric Supply Company (Pesco) and Gujranwala Electric Power Company (Gepco) at different levels of voltages through a number of supply points on the basis of tariffs notified by Nepra.

Electricity Department of AJ&K receives the power in bulk at Rs18.79/kWh non-ToU, Rs24.49/kWh ToU-peak and Rs17.59/kWh ToU, off-peak. The AJ&K government pays the distribution companies at Rs2.59/kWh, which result in per year deficit of Rs38 billion. AJ&K government charges its consumers at the rate notified by GoP which is uniform across the country.

The difference between GoP notified rates payment by AJ&K at Rs2.59 kWh has resulted in receivables of Rs156.7 billion, of which receivables of Gepco were Rs17.93 billion, Iesco Rs108.5 billion and Pesco Rs30.17 billion since 2007.

On March 20, 2019, the Economic Coordination Committee (ECC) of the Cabinet directed that bulk power supply to AJ&K should be made from CPPA-G as is being done in case of Karachi Electric (KE) as per tariff determination by Nepra. The decision also states that "Federal Government support on power cost differential of Rs @ 2.59/ kWh against GoP notified rate shall be eliminated and deficit grant to the Government of AJ&K shall be adjusted against the revenue from this source."

On June 19, 2019, the ECC further decided "on account of AJ&K receivables of three Discos i.e. Rs119.05 billion of which the share of Iesco was Rs80.58 billion, Gepco, Rs15.08 billion and Pesco Rs23.39 billion), Rs18.6 billion, were on account of taxes. From the balance of Rs100.5 billion(119.05-18.6), Rs27 billion will be adjusted as cash @ Rs9 billion per year, Rs16 billion, as non-cash against the re-lent loans for the three Discos and the balance of Rs57.5 billion, as equity in the Discos in ratio equivalent to the percentage share of their outstanding liabilities against CPPA-G. Claims of AJ&K subsidy beyond June 30, 2019 will be dealt with in accordance with agreement off GoAJK."

According to previous ECC decision, Rs27 billion was to be adjusted as cash adjustment @ of Rs9 billion per year though not so far adjusted in any year.

After incorporating the non cash/ equity adjustment the net receivables from AJ&K by Discos would be reduced to Rs99.13 billion.

According to sources, the issue of AJ&K tariff was again discussed at a meeting on September 16, 2020, held under the chairmanship of Prime Minister, Imran Khan, wherein it was decided that the proposal for change in bulk tariff rate for AJ&K be presented in ECC.

The sources said, Power Division has proposed the following proposals for consideration of the ECC; (i) Ministry of Finance may be directed to release the payment of Rs27 billion @ Rs9 billion per year for the years 2018, 19 and 20; (ii) Finance Division may be directed to budget Rs38 billion per year through variable deficit grant for AJ&K and it may be deducted at source and released to respective Discos through CPPA-G and; (iii) the net receivables of Rs99.13 billion may be released as adjustment to Power Division.

The sources said that the final decision will be taken by the ECC in the light of Power Division's proposal and comments of Nepra, Finance Division, Planning and Special Initiatives Division and Kashmir Affairs Division.

Copyright Business Recorder, 2020