Economic Co-ordination Committee (ECC) of the Cabinet has accorded ex-post facto approval of Rs 1.70 per unit increase in power tariff imposed by the Ministry of Water and Power under surcharges. Ministry of Water and Power, while presenting its case, argued that circular debt has emerged due to less than full pass through of the generation cost and lesser recovery. Due to non-transfer of mark-up cost and less recovery by Discos, loans from banks have been arranged for making payment to power producers to maintain power generation.
The mark-up cost on such loans and delayed payment is prudent utility cost that needs to be transferred to and recovered from the end consumers. This cost has not been determined or transferred to consumers through tariff. According to official documents, present markup income and any other income were being recognised by Nepra by allowing tariff to Discos to reduce their tariff by an equal amount while determining tariff under the Nepra Act 1997 & rules thereunder.
On the same principle of ensuring uniformity, mark-up costs and any other costs associated with the generation, transmission and distribution needed to be recognised and allowed in tariff of distribution companies. It would be quite appropriate to allow debt servicing, equalisation surcharges, etc, it was further argued. In order to recover full cost of service and avoid further financial crisis, ECC of the Cabinet was requested to issue Policy Guidelines to Nepra to incorporate debt servicing on actual basis in revenue requirements of Discos which would be adjusted in tariff of Discos.
The ECC of the Cabinet while considering the summary dated 27th May, 2014 submitted by the Ministry of Water and Power on "Policy Guidelines to Nepra" to incorporate debt servicing on actual basis in revenue requirements of Discos approved issuance of Policy Guidelines to Nepra to incorporate debt servicing on actual basis in revenue requirements of Discos which would be adjusted in tariff of Discos.
Ministry of Water and Power briefed the ECC in its previous meeting that in pursuance of the previous ECC decision read with Section 7(6) of the Nepra Act 1997, Ministry of Water & Power issued policy guidelines to Nepra to make adjustment of Rs 0.30/Kwh in tariff of the Discos on account of debt service charge which was Rs 0.42/Kwh from 1st October, 2014. Nepra responded and advised to recover the debt servicing as surcharge under Section 31(5) of the NEPRA Act.
Accordingly, ECC decision read with Sub Section-5 of Section-31 of the Regulation of Generation, Transmission and Distribution of Electric Power Act 1997 (XL of 1997) Federal Government notified the debt service charge @ Rs 0.30/Kwh from 1st October, 2014. In addition to above, Rs 0.38/kwh and Rs 0.60/kwh were also notified as Universal Obligation Fund (UOF) effective from November 1, 2014 and January 01 2015 in pursuance of permission available to the Federal Government under the NEPRA Act, 1997. The fund would be utilised to discharge the liabilities of generators. Water and Power Ministry imposed all surcharges on the advice and directives of Finance Minister, Senator Ishaq Dar, who faces criticism from international financial institutions due to poor performance of power sector.