ISLAMABAD: The government is likely to outsource metering, billing and collection to the private sector after acknowledging that Pakistan Electric Power Company (Pepco) is unable to fulfil these responsibilities honestly and efficiently, sources close to Minister for Finance told Business Recorder.
"Involvement of private sector in metering, billing and collection shall be explored and progress thereon shall be reported to the Cabinet, in addition to implementing a uniform single tariff across the country," sources said. The landmark decision was taken by the Cabinet in its meeting on October 12, 2011, which was presided over by Prime Minister Yousaf Raza Gilani. The Cabinet was informed that despite expenditure of around Rs 1000 billion during the past four years, the problem of load shedding still persists, which has cost the nation loss of industrial productivity and economic growth and has been threatening the economic stability of the country.
The Prime Minister, taking cognisance of the energy crisis in the country, had constituted a committee, headed by Finance Minister, with Minister for Water and Power, Minister for Petroleum and Natural Resources, Deputy Chairman Planning Commission and Deputy Governor State Bank of Pakistan, as its members, to resolve the issue 'on permanent basis'.
The committee held several meetings spanning over one hundred hours and, with the assistance of a team of experts, undertook an in-depth analysis of the situation and evolved a target oriented strategy, identified practical solutions and submitted a set of consolidated recommendations for consideration of the Cabinet. It was stated that the industrial production losses had been recorded to the tune of 2 percent of the GDP; the circular debt had accumulated to Rs 300 billion, while the power generation infrastructure and oil refineries are running much below their capacity. It was stated that only 14,500 megawatts are being supplied to the distribution network while demand is around 19,000 megawatts.
It was further stated that the committee had also examined the tariff structure, the element of subsidy and non-recovery of outstanding bills, which had culminated in the accumulation of circular debt. The Committee specifically focused on issues related to demand-supply gap, fuel mix, power generation options, role of the key power sector players, power sector financing mechanism and factors leading to the recent power crisis.
The Cabinet was informed that the recent electricity crisis was mainly due to reduction in hydel power generation by 3000 MW, loss of 2000 MW due to fuel and gas shortage and tripping of the Chashma Nuclear Power Plant. These factors accounted for drop in power generation by 5000 MW, thereby further reducing availability of electricity to its lowest ebb of 9000 MW against un-seasonal increase in demand by 2000 MW.
It was felt that strong political will would be necessary to meet the challenge of power shortage by taking difficult decisions. After detailed discussion, the Cabinet took the following decisions: (i) Pepco shall be dissolved by the end of this month (October 2011), and Central Power Purchase Agency (CPPA) shall be established as its successor; (ii) professional management teams shall be put in place for generation and distribution companies, the financial systems in discos and gencos shall be revamped; the working of the National Power Control Centre (NPCC) shall be streamlined and a Power Directorate in the Ministry of Water and Power shall be created with merit-based market professionals, by December 2011; (iii) 100 percent recovery of the current bills shall be ensured, and connections of defaulters shall be disconnected after 45 days of default, without any exemption/discrimination whatsoever; (iv) two months security deposits shall be paid by the new and defaulting consumers to get a re-connection. However, the small consumers, consuming up to 100 units, shall continue to be regulated as per the existing procedure; (v) private and public sector receivables/arrears shall be collected in six months and there shall be no exemption whatsoever; (vi) involvement of private sector in metering, billing and collection shall be explored and progress thereon shall be reported to the Cabinet; (vii) a mechanism for uniform single tariff for the country shall be introduced while the system of tariff determination shall be simplified; (vii) clear-cut yardstick shall be set for reduction of losses; (ix) working of Nepra shall be further streamlined and strengthened; and (x) payment of GST by receiving agencies on non-paid bills shall be exempted.
The committee on energy was directed to submit a financial plan after considering all aspects of outstanding arrears collection, optimum utilisation of available generation potential and outcome of the energy saving measures for the Cabinet for consideration of allocation of funds for permanent solution. The committee was directed to hold meetings with Chief Minister and Governor of Balochistan to formulate a practical policy on metering of tube-wells and determination of subsidy ratio in this regard.
The committee on energy was also directed to monitor the implementation of these decisions and submit monthly progress reports for consideration of the Cabinet. The Cabinet Committee on Restructuring of Public Sector Enterprises (PSEs) was charged with the responsibility of monitoring the implementation of the decisions with reference to restructuring of the concerned power related enterprises.
The Cabinet also decided that a Committee comprising Minister for Finance, Minister for Religious Affairs, Minister of Water & Power and Minister for Kashmir Affairs & Gilgit Baltistan shall formulate practical recommendations, in consultation with the main committee on energy, on load management and timing of supply of electricity to the agricultural tube-wells. The committee will submit its report in the next meeting of the Cabinet.