“…It is important to note with annual power consumption hovering around 70 billion units, delay in power tariff raise causes additional burden of around Rs 25-30 billion per month on government and will keep power supply from IPPs at the lower end resulting in electricity outages….”
Power sector payables again mount to Rs 155.64bn
ISLAMABAD: The power sector’s dues against the National Transmission and Distribution Company (NTDC) have galloped to Rs 155.64 billion as planners were slow in announcing increase in power tariff, fixing the power theft and increase the collection of bills.
The government cleared circular debt of power sector up till May 31, 2013 recently. The government increased the power tariff for commercial industrial users whereas domestic tariff would be increased from October 1.
Power sector experts believe rationalisation of tariff as above will bring some relief for the government but the challenge remains how to stop the theft and non-recovery of the bills, which will cause the circular debt to rise again.
The clearance of circular debt by this government was a very bold and right step but wrongly projected as resolution to power crisis, it was only an attempt to keep the power sector afloat whereas the real challenge lies in recovery of bills, tariff rationalisation for both domestic and commercial consumers and stopping the theft and reducing the line losses through upgradation of transmission and distribution system, the experts said.
The analysis of the above outstanding amount tells NTDC has to pay Rs 54 billion to such independent power producers (IPPs), which have to procure the fuel from their own sources and most of them have to pay the long-term debt installment by September 30, 2013.
Such IPPs will have to pay the lenders and if their outstanding are not cleared they have to reduce the production, which will increase the load shedding. Rest of Rs 102 billion are payable within government entities and non-payment to those will not affect the generation of the electricity.
The government should increase the payment of subsidy to meet the payment of outstanding amounting to Rs 54 billion by September 30, 2013 so that chance of decrease in generation may be eliminated.
Power Ministry sources said under new arrangement NTDC has to pay after 30 days of power supply to IPPs operating under 2002-power policy. The IPPs said an accord was signed in this regard and the government of Pakistan has written to National Electric Power Regulatory Authority (NEPRA) in this regard.
The IPPs had also submitted their proposal to NEPRA for approval of the additional cost of working capital. They pointed out that the government would save interest cost (from KIBOR+4.5% to KIBOR+ 2%) if NEPRA approves the additional cost of working capital.
Hasan Raza a senior research analyst at Taurus Securities said, “Procrastination on part of the government has resulted in resurrection of circular debt in recent days. Although the government has raised the power tariffs for industrial consumers, tariff hike for domestic sector is yet to be implemented.”
He said though the government appears committed to see circular debt through, the domestic tariff hike will test the adamance of the government. It is important to note with annual power consumption hovering around 70 billion units, delay in power tariff raise causes additional burden of around Rs 25-30 billion per month on government and will keep power supply from IPPs at the lower end resulting in electricity outages.