Talking about power generation from Thar coal, he said domestic coal was the cheapest source of electricity, but the only project that appeared to be making some progress was a 1200MW project being jointly pursued by Engro and the Sindh government and approval had also been given for laying a transmission line from Thar to Matiari. - File photo

ISLAMABAD: People in the government avoid talking about recovering the actual cost of electricity from consumers, not only because power rates will skyrocket but also because in that case consumers in Punjab will pay less than those in three other provinces and that may dent the popularity of the PPP and its coalition partners.

This was the crux of a background briefing to a group of economic journalists by a senior cabinet member who himself is not ready to discuss the issue in public.

When the government was considering to increase power tariff during the current month a crisis sparked by ‘non-issues’ forced it to stay away from politically difficult decisions.

“Why should we take the public blame when certain quarters talk about packing the government in three months,” he said.

He said one way of reducing power sector losses was to stop electricity supply to areas where line losses and theft were too high and supply electricity on the basis of maximum recovery, but that will mean full supplies in Punjab because power companies in Gujranwala, Faisalabad and Lahore and also in Islamabad have up to 95 per cent recovery rate. In comparison, Quetta, Multan, Sukkur, Peshawar and Hyderabad have high line losses which could create political upheaval for the government and its allies, he said.

Eventually, he said, differential tariffs would have to be introduced because “unless you don’t differentiate between a paying consumer and a thief, tariff increases will keep on burdening honest consumers, which is not sustainable in the long run”.

But that is not the only hindrance in helping the power sector. A recent suggestion by the National Electric Power Regulatory Authority for Rs3.54 per unit increase in uniform tariff has sent shockwaves among policy-makers.

The senior government functionary said Nepra had increased the benchmark fuel price from Rs45,000 per ton to Rs65,000 per ton despite the fact that it had been passing on the impact of fuel cost to consumers in monthly bills.

He said the government had contested the Nepra determination on the grounds that there was no justification for increasing benchmark fuel rates in the base tariff when fuel price adjustment was part of a monthly automatic tariff revision.

“If accepted, the rising oil prices in the international market could cause a double jolt to consumers,” he said.

On top of that, the performance of independent boards of directors of distribution companies put in place by the current government in recent months has been a disappointment.

“We have not been able to find suitable and professional board members and chief executives even though the selection process was made through a collective decision making by a ministerial committee on restructuring on the premise to reduce the role of ministry of water and power.”

He confirmed that some lawmakers had suggested to the government to make aggressive borrowing to overcome the chronic circular debt and meet full fuel requirements for ending loadshedding as they faced a lot of criticism from the people of their constituencies. But this was not acceptable to the ministry of finance.

But part of the loadshedding was because of the fact that the ministry of finance did not release committed funds despite decisions taken at the top level. He said the recent decision of Rs160 billion debt swapping taken over by the ministry of water and power would in fact reduce the financing cost owing to reduced interest to be charged by banks against government guarantees.

It will ensure that a part of the tariff to be recovered by the respective distribution company would be directly paid to banks.

He said that electricity supply would improve in a few days with maximum generation from hydropower stations as provinces had started opening their canals after the annual closure period.

He said the government had been at a loss to figure out why the average gap between power supply and demand continued to hover around 3000MW despite induction of over 3,200MW of fresh capacity over the past two years. But one thing that has become evident is that Wapda companies do not have a proper way of commuting power demand. The dependable generation capacity has remained static at about 15,000MW.

He said a meeting scheduled to hammer out differences with Nepra over tariff increase as a result of the change in the benchmark fuel cost had been postponed because of finance minister’s visit Davos to attend World Economic Forum meetings.

Talking about power generation from Thar coal, he said domestic coal was the cheapest source of electricity, but the only project that appeared to be making some progress was a 1200MW project being jointly pursued by Engro and the Sindh government and approval had also been given for laying a transmission line from Thar to Matiari.