The implementation of this plan is subject to consent of International Monetary Fund (IMF), which according to insiders is not ready to entertain government's request despite hectic efforts by the Power Division and Finance Division. If this tariff freezing plan is cleared by the federal cabinet, the Power Division will issue directives to Nepra to determine monthly Fuel Price Adjustment (FPA) but the government will not pass it on to the consumers.
"If we continue to pursue the existing efforts for three or four years' or more the public will get sustained supply of electricity the whole year," the sources continued.
CPPA- G has sought an average cumulative increase of Rs 1.50 per unit for three months ie November and December 2019 and January 2020. For November 2019, CPPA-G had sought Rs 0.99 per unit increase, followed by Rs 2 per unit increase for December, 2019 and Rs 1.50 per unit increase for January, 2020. If the requested increased is clubbed together, the average increase will be Rs 1.50 per unit per month, which will take the prevalent tariff to Rs 17 per unit from existing level of Rs 15.50 per unit.
There is an impression at the highest level that if tariff is frozen at the current level, efforts meant to reduce losses and theft will be fruitful and this observation has also been shared with the International Monetary Fund (IMF).
Power Division, which is facing "figure manipulation" charges from the National Electric Power Regulatory Authority (Nepra) and is visiting Prime Ministers' Office every day for reconciliation of statistics as the regulator has claimed that the claims of Power Division are contrary to facts. Chairman Nepra Tauseef H Siddiqi recently met Prime Minister Imran Khan and briefed him about the woes of power sector.
"Since Chairman Nepra briefed the Prime Minister on power sector current status (financial and administrative), Power Division is under severe pressure from the highest level about its claims," the sources maintained. However, some officials argue that Chairman Nepra cannot write a letter to the Prime Minister directly. When Chairman informed the Prime Minister that the energy sector circular debt has crossed Rs 1.9 trillion, he came down hard on the Power Division which was claiming circular debt of Rs 1.7 trillion.
As part of circular debt retirement plan, the government will issue new guarantees to transfer costly CPPA payables to IPPs into the PHPL: (i) the government will absorb PHPL into its budget, fully recognizing the liabilities in PHPL as debt of the government of Pakistan and taking over the servicing of the loans contained in PHPL; and (ii) the government will reduce the stock of outstanding payables through the use of power assets privatization proceeds, recoveries from the outstanding stock of receivables, the existing debt servicing surcharge, and the rightsizing of sector-related subsidies.
The sources said, the government is also considering spreading debts of three coal power plants, three RLNG power plants and two nuclear power plants from 10 year payment period to 30 years and 40 years respectively. The debts of these power plants stand at Rs 50 billion. This implies that debts of these public sector plants will be paid in more years, however, interest payment will be higher.
Another proposal which is under consideration is to defer return on equity of Neelum Jhelum Hydropower Project for five or ten years. If this proposal sails through, the power sector will have additional space of Rs 40 billion. The sources said another proposal under discussion is that Net Hydel Profit (NHP) should not be made part of consumers' end tariff as, according to the Constitution Wapda has to pay NHP (erstwhile Water Usage Charges) from its own profit and not through tariff. There is no mention of AGN Kazi formula. According to sources, it has also been brought to the notice of top decision makers that power sector consumers are heavily overburdened with taxes and if these taxes are done away with, its financial impact will be around Rs 150 billion per annum.