Finance Ministry has reportedly opposed waiving off Rs 50 billion to Sindh government through an agreement tailored by the Ministry of Water and Power saying that the proposed settlement will create a precedent for other provinces which cannot be entertained, sources close to Finance Minister told Business Recorder. As per the decision of Council of Common Interests (CCI), at source deduction of reconciled bills of Discos and government receipts has to be made by the Federal Adjuster which is being implemented.
The current arrangement agreed with Government of Sindh is a deviation from the decision of the CCI and thus is not legally tenable. The basis/rationale of the proposed settlement has not been clearly spelt out, and neither any rule nor policy suggests writing off Rs 50.18 billion out of arrear amount of Rs 77.54 billion or 65 per cent of the due amount.
The sources said, against the total outstanding amount of Rs 128.44 billion, Government of Sindh has already paid Rs 50.90 billion without any agreement/ settlement. Therefore, the amount available for the proposed settlement is Rs 78.21 billion. The 60 per cent of this amount therefore comes to Rs 47 billion instead of Rs 27 billion. The amount billed to Government of Sindh was electricity tariff, based on the determination of Nepra and notified by the Government of Pakistan which cannot be adjusted at a later date nor does any such precedent exist as proposed by the Water and Power Ministry.
According to sources, GoP has paid Tariff Differential Subsidy (TDS) based on the entire billing from July 2010 to July 2016 to the companies. The amount paid in excess has to be refunded to GoP. "The proposed settlement will create a precedent for other provinces and the Ministry of Water and Power may not be able to entertain such requests," the sources continued.
According to official documents, Water and Power Ministry in its summary for the ECC has explained that power sector has shown a major improvement in its performance during the last two years including improved recoveries, reduction in losses, improved generation management, improved and predictable load management. During these two years, there has also been a gradual increase in the recoveries from end consumers, both in public and private categories, which has resulted in increased recoveries ratios to the tune of 94% and has reduced increase in receivables. All this has been achieved as a result of several initiatives undertaken by the Ministry of Water and Power ranging from revenue based load management, improved billing system, mobile meter reading to regular monitoring at Ministry level on performance of Discos.
The Ministry maintains that existing stock of receivables has also being handled to reduce it and recover from the defaulting consumers. Out of the Discos in the power sector (10 in number other than KE), two Discos operate in Sindh, Hyderabad Electric Supply Company (Hesco) and Sukkur Electric Supply Company (Sepco). In terms of ratios of outstanding receivables in public and private set of consumers, these two companies have a higher percentage of outstanding receivables in consumers with government connections.
Several attempts were made since 2010 to settle these outstanding receivables through negotiations, or at source deduction as per a Council of Common Interests (CCI) decision made in its meeting held on May 29, 2014. It was decided to make at source deduction of the electricity charges relating to the Provincial government departments at the rate of 25% of the amount of the bill subject to reconciliation of the electricity bill between the concerned Power Distribution Company and the relevant government department within a period of sixty days. It was further decided that failing this arrangement, the next deduction will not take place until reconciliation is done.
Consequently, all Discos were directed to implement the CCI decision and all Discos except Hesco and SEPCO, have been providing reconciled claims of Provincial government Departments/ Agencies to Finance Division for at source deduction @ 25% of fresh/new electricity charges since 1st July, 2014. However, similar deductions could not be made from Government of Sindh departments (GoS) after July 2014 owing to non-reconciliation of accounts between the concerned Discos and GoS. The Government of Sindh had been pointing out the practice of over-billing in the GoS connections in these Discos to cover up the inefficiencies and theft prevailing in these companies.
In order to implement the CCI decision, the issue was constantly highlighted at relevant forums. The issue was also deliberated in Cabinet Committee on Energy (CCE) meeting held on 22.02.2016 vide case No CCE-01/01/2016, wherein it was directed, inter alia, to hold discussions with the Government of Sindh to resolve the issue of payment of an outstanding amount of Rs 70 billion on account of electricity bills. The meeting was accordingly held with the Government of Sindh on 17.03.2016, wherein it was decided to settle the claims on certain agreed parameters, by April 2016. Subsequent meetings to resolve the outstanding billing and recovery issues between the GoS, HESCO and SEPCO were held at Islamabad in the Ministry of Water and Power, attended by the relevant stakeholders.
The results of a joint verification by the Discos and the GoS of load/billing from a sample check of 3199 connections was discussed and it was noted that only 60% billing out of the total billing for the period July 2010 to January 2016 could be verified. Accordingly, it was decided that the sample check results would be applied to all load/billing and 60% overall would be considered verified whereas 40% would be treated as non-verified and adjusted accordingly.
It was further discussed that for the outstanding dues for the period from February 2016 and July 2016, the average agreed billing amount per month from July 2010 to January 2016, ie, the previous 67 months, would be taken as a basis for calculation of outstanding amount during this period.
The following was decided in these meetings: (i) The Government of Sindh shall make the payment of balance outstanding amount of Rs 27.398 billion, which will be treated as full and final settlement of all the dues as claimed by GoS and Discos, including all taxes, surcharges and other levies, for the period July 2010 till July 2016. It was also agreed that the GoS and the Discos would not, after full and final settlement, raise any outstanding issues, claims or other liabilities, whatsoever, in relation to the settlement period, including those in relation to arrears of electricity bills, late payment surcharge, previously reconciled bills or write-offs, electricity duty etc; (ii) in order to avoid such disputes in future, it was further agreed that (a) an automatic meter reading system (AMR/AMI) would be installed on all connections owned by GoS by 31.12.2016, 50% of the cost of which would be borne by GoS. Online access would be provided to GoS (Energy Department) by the Discos to the AMR system. The Energy Department of the GoS will also prescribe a maximum limit of consumption for each connection/meter to the Discos, intimate to the respective Discos when such limit is crossed and ask for disconnection of supplies of such consumers. On such intimation, the respective Discos shall ensure that electricity supply is discontinued to those connection/meters which have so far been intimated by the Energy Department; and (b) Discos will install individual meters in place of bulk supply meters in all housing colonies owned by GoS. In order to facilitate the Discos, the GoS would provide details of required individual connections/meters, and the full cost of such individual meters as well as their installation would be borne by GoS. Any delay in identifying such connections shall be the responsibility of GoS which shall continue to pay the energy charges as reflected on the bulk meters, fill installation of individual meters; (iii) the agreed outstanding amount, ie Rs 27.398 billion shall be cleared by the GoS in six equal instalments (of Rs 4.566 billion each) starting from September 2016. Further, the GoS shall also pay the above mentioned amount along with 50% cost of AMR meter installation;(iv) the GoS shall make arrangements for payment of all monthly bills as recorded on AMR/AMI system within 60 days of issuance of bill. If GoS fails to pay all the due bills within 60 days, any outstanding amount thereafter will be subject to a late payment surcharge at the rate admissible. However, the GoS will not be liable to pay the monthly electricity dues against those connections/meters where (a) last paid amount has not been reflected in payment history of electricity bill; (b) reading on AMI/Smart meter and bill differs; and (v) the remaining billing ie August 2016 till installation of AMR/AMI shall be paid by GoS on the basis of average agreed billing for the 67 months as given above, ie, Rs 513.73 million per month for HESCO and Rs 555.82 million per month for Sepco, and these amounts will be cleared within 60 days from the date of issuance of a particular bill.
The documents further reveal that the proposed arrangement for settlement of stock of receivables from GoS was presented by HESCO and SEPCO to their respective Board of Directors (BoDs). The Sindh Cabinet has also approved the proposal in its meeting held on 19.09.2016. Both Companies' BoDs agreed to the above proposals and requested to present the case before competent forum through MoW&P.
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