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Power sector revenues.

The government has set a target of Rs.140 billion for power distribution companies which will recover it through reduction in line losses and increase in collection of electricity bills in order to offset the impact of industrial support package. For the power division current line losses and improvement in the recovery of electricity bills a target of RS. 60 billion has been set for the current fiscal year. In addition to that, a target of Rs.80 been billion has been set for the last financial year to offset the impact of industrial support package.

The industrial consumers will continue to receive support package of Rs. 3 per unit. It will be funded through efficiency gains in power sector with improvement in bill recoveries and reduction in distribution losses. The tariff change for industrial consumers will remain within the revenue requirements. Five zero rated industries would be given a rate of 7.5 US cents per unit.

The Prime Minister's initiative to control power theft has been launched in Punjab through a joint task force of power division and provincial government. A similar exercise will be launched in all other provinces. The culture of power theft is more deep rooted in the provinces of Sindh, particularly in the areas controlled by feudal cum mercantile big consumers of interior Sindh who have a tremendous political clout, Baluchistan and KPK. The non-recovery of electricity bills was estimated 10 percent in 2017-18. However, the cumulative power sector default is well over Rs. 860 billion the recovery of which needs immediate and strict measures. In order to improve recovery, a target of 2 percent per year, amounting to Rs. 23 billion, has been set through use of technology and administrative measures.

In a recent meeting of Economic Coordination Committee (ECC), it was informed that substantial amount of revenue could be generated through reduction in line losses and improvement in bills recovery. The committee emphasised that there should be zero tolerance against defaulters of electricity bills. Actual line losses in the power sector stood at 18.3 percent. However, NEPRA allowed recovery of 16.3 percent which resulted in addition of Rs.202 billion to circular debt. The low recovery of power bills was also a major reason, which stood at 90 percent. It added Rs.205 to circular debt. An amount of Rs. 102 billion had been added to circular debt due to payment subsidy to consumers of tribal areas and AJK.

Line losses, electricity theft and default on payment of electricity bills are the major factors which have made worse the power sector crisis. Officials of power distribution companies usually face the vendetta of influential political and business elite in their recovery and disconnection drive. These companies are also confronted with the non-cooperation of government departments and public sector enterprises which do not positively respond to clearing the arrears of electricity bills in instalments with waiver of surcharges. The cumulative arrears can be recovered by the federal government through at source deduction by activating the federal adjuster in the finance ministry.

The Asian Development Bank had approved a loan of $ 5 billion in November 2015 for upgrading the dilapidated power transmission and distribution system and implementation of advanced metering infrastructure (AMI) project. Out of this multi-finance facility $ 400 million were to be spent on the installation of smart meters in the jurisdiction of power distribution companies with satisfactory recovery position. Only two power distribution companies including Islamabad Electric Supply Company (IESCO) and Lahore Electric Supply Company (LESCO) meet the required criteria.

The previous government was not interested in implementing the advanced metering infrastructure project because of political expediency. The PTI government is not suffering from the syndrome of not offending the political and business elite who are addicted to power theft and default of electricity bills. Pakistan has been paying commitment charges on the undisbursed amount of ADB loan from taxpayers' money. The original closing date of smart meters installation project is June next year. The stated objectives of the loan are reducing line losses and improving revenue collection; enhancing load control and load management; providing automated data consumption for all consumers; and modernizing the electricity metering and billing system.

The ADB is pushing the project on the premise that prepaid electricity meters will control the flow of electricity and ensure 100 percent collection of bills. The Economic Affairs Division had expressed concern a few months ago that cancellation of ADB multi-finance facility will affect the prospect of acquiring loans in future from the multilateral lending agency. Hopefully, the incumbent government will avail the ADB loans for modernizing the power transmission and distribution system and bills recovery mechanism.
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Publication:Frontier Post (Peshawar, Pakistan)
Date:Oct 28, 2018
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