14 percent raise in power tariff proposed

Planning Commission has proposed an increase of 14 percent in electricity tariff aimed at minimising circular debt of power sector in the current fiscal year. According to documents, Planning Commission noted that the difference between the notified tariff and determined tariff stands at Rs 3.08 per unit. And if this trend continues the difference between the notified and determined tariff would rise to Rs 6 per kilowatt hour in 2013.
To reduce the difference the Planning Commission recommends up to 14 percent increase in electricity tariffs. The Commission projected a power sector deficit of Rs 592 billion by the end of 2013 due to Rs 277 billion (47 percent)cost not covered in tariff determination, tariff differential subsidy (TDS) of Rs 215 billion (36 percent) and Fuel Price Adjustment (FPA) of Rs 100 billion (17 percent).
The rupees 277 billion costs not covered in tariff determination include as per the Planning Commission Rs 6 billion (1 percent) for heat rate differences at Gencos, Rs 60 billion (10 percent) cost of delays in tariff determination and notification, Rs 29 billion (5 percent) in line losses beyond Nepra limits, Rs 107 billion (18 percent) recovery and Rs 75 billion (13 percent) interest not allowed.
The Tariff Differential Subsidy estimated at Rs 215 billion included as per the Planning Commission structural Rs 117 billion (20 percent) with a 7 percent increase every year (14 percent if 2013 determination) and Rs 98 billion (17 percent) for notified below Lowest Determined Tariff (LDT) with a 7 percent increase per annum estimated.
Fuel Price Adjustment (FPA) is estimated at Rs 100 billion (17 percent), a total of Rs 80 billion (13 percent) is non-recovery from consumers due to stay orders from the courts and Rs 20 billion (3 percent) deferred due to transmission and distribution loses etc. The report on "The cause and Impact of Power Sector Circular Debt in Pakistan" of the Planning Commission states that the main cause of circular debt is bad governance, political interference, short-sighted and defective polices, under-budgeting of TDS, and non-settlement of intra and inter-government issues.
"The government has also failed to pass legislation to curb theft and promote energy conservation as well as protect diligent functionaries. At the corporate level, poor governance and ineffectiveness of the Disco BODs in guiding and monitoring company performance are major problems," the report says.