Power sector quagmire: Implementation of 3-pronged strategy begins

ISLAMABAD: The government is said to have started implementation on a three-pronged strategy to deal with power sector quagmire which includes anti-theft/recovery drive, conservation through early closure of shops and negotiations with CPEC IPPs on revision in Power Purchase Agreements (PPAs), well-informed sources told Business Recorder.

Power Division has projected financial loss of Rs 589 billion during 2023-24, of which Rs 387 billion will be on account of less recovery whereas Rs 201 billion is due to Transmission and Distribution (T&D) losses. The share of taxes in bills will be Rs 734 billion in the Rs 1.912 trillion total losses under theft/low recovery.

According to an estimate, four Discos i.e. Islamabad Electric Supply Company (Iesco), Lahore Electric Supply Company (Lesco), Gujranwala Electric Power Company (Gepco) and Multan Electric Power Company (Mepco) will sell 81 billion units during the fiscal year and will collect Rs3.058 trillion revenues and losses/under recoveries will account for Rs 151 billion. Of this amount, loss of Iesco will be Rs 41 billion, Lesco Rs 43 billion, Gepco Rs 12 billion, Fesco Rs 17 billion and Mepco Rs 38 billion.

Govt to tighten the noose around power thieves

At the same time, five Discos i.e. Pesco, Hesco, Qesco, Sepco and Tesco will sell 29 billion units during the year but will collect only Rs 723 billion with their combined loss of Rs 438 billion. Of this, Pepco’s loss will be Rs 137 billion, Hesco, Rs 53 billion, Qesco, Rs 138 billion, Sepco, Rs 59 billion and Tesco, Rs 51 billion.

The number of running defaulters of all Discos across the country stood at 929,886 whereas disconnected defaulters are 144,909, sans KE.

The total amount against running defaulters, disconnected defaulters, deferred amount and instalments stood at Rs 1.151 trillion of which deferred amount is Rs 71.744 billion whereas an amount of Rs 4.571 billion are on account of instalments.

“Crackdown against power theft starts from September 7. All Chief Secretaries and IGPs are on-board for this campaign. We know it is not easy but failure is not an option. Field formations directed to spare no one: high or mighty; sacred or not-so-sacred,” said Secretary Power, in a tweet.

The total receivables for July 2023 were Rs 1.7867 trillion which includes arrears of Rs 1.151 trillion, slipover of Rs 229.1 billion, subsidy amount of Rs 196.985 million and government receivables of Rs 219 billion.

Power sector’s total liability is Rs 3,478 billion plus Distribution Margin of Rs 341 billion whereas revenue including Prior Year Adjustment (PYA) is Rs2,503 billion plus DM of Rs 431 billion, showing annual gap of Rs 976 billion.

The bifurcation of Rs 976 billion annual gap is as follows: (i) Discos under recovery Rs 263 billion;(ii) loss above Nepra target Rs 201 billion;(iii) interest charge on IPPs Rs 177 billion;(iv) policy driven tariff differential Rs 451 billion;(v) prior year FCA, QTA, PYA negative Rs 117 billion.

Liability of Rs 3,478 billion plus DM of Rs 341 billion comprises of fixed charges of Rs 2,344 billion and variable charges of Rs 1,134 billion. Of fixed charges of Rs 2,344 billion, share of Capacity Payment Price (CPP) is Rs 2,010 billion, Use of System Charges (UoSC) Rs 158 billion and mark up Rs 177 billion. The projected Circular Debt (CD) flow is Rs 392 billion. Power Division has sought fiscal support for flow of Rs 584 billion.

Of Rs 21.47 per unit cost, share of Capacity Purchase Price is Rs 2,010 trillion while Rs 961 billion is Energy Purchase Price (EPP).

The sources said the government will also start energy conservation drive from next month. For this purpose, shops will be closed before 8 pm. Only, hotels, bakeries and medical stores will be allowed to remain open. For this purpose, business community will be taken into confidence. With implementation on this strategy, the government will save expensive foreign exchange being spent on import of different fuels as in winter hydel share drops significantly.

The third strategy relates to engaging with the Chinese top leadership and top bosses of Chinese power plants established under China Pakistan Economic Corridor (CPEC) framework.

Though, in the past, the government did not receive any encouraging response from China on renegotiation of PPAs meant to bring down consumer end-tariff, Islamabad is hoping that this time Beijing will consider its request positively due to current financial woes.

Imran Khan’s government had also tailored a comprehensive proposal on this issue and shared it with the Chinese but the response was unenthusiastic.

The government may request other IPPs to revise their tariffs once again in the best national interest as they did in the past. However, there is no official confirmation from any side except that work is silently in progress.

Copyright Business Recorder, 2023