LAHORE, July 29: Wapda’s automatic tariff adjustment (ATA) formula seems to have hit snags as the government is resisting increases in electricity tariff in proportion to the surging furnace oil prices.

Precisely for this reason, the National Electric Power Regulatory Authority (Nepra) has yet to announce the tariff revision, which became due on July 1, 2003.

According to the last revision on March 28, Nepra had promised Wapda an automatic increase of 24 paisas per unit this quarter to compensate for the losses of last quarter on account of furnace oil prices. But as political and social pressure grows against such increases, the government and Nepra seem to back away from the formula.

On the other hand, the government is either unwilling or unable to control the price of furnace oil which is one of the major causes of Wapda’s financial woes, making a mockery of the second Financial Improvement Plan (FIP) for Wapda that the government has itself prepared and submitted to the World Bank.

While revising the tariff on March 28, Nepra sated: “The increase in average sale rate required to compensate for increased fuel cost works out to be 23.70 paisas per unit. But in pursuance of Para 7 of the prescribed formula, the increase in sale rate in a quarter has to be restricted to three per cent to avoid severe fluctuation due to excessive quarterly increase in rates. In this case, the three per cent limit works out to be 11.79 paisas per unit. Consequently, an amount of Rs1.548 billion will remain uncovered this quarter. The amount shall be adjusted in the next financial year.”

It may be mentioned that Wapda had asked for an increase of 64 paisas per unit, but the Nepra allowed 23.79 paisas.

However, the government notified only a seven-paisa increase after a lapse of 42 days, on May 10. “The government’s preference for as low a tariff as possible is commendable,” says an official of Wapda. Nobody, including Wapda, wants to increase the electricity tariff, which is already the highest in the world and which increases instances of theft and contributes to higher line losses. But, the government should also try to control the price of input, which is furnace oil in this case. Over the last decade, its price has gone up from Rs5,500 a ton to Rs15,800. How could one expect Wapda to absorb the huge impact, he asked.

The government plans to collect a staggering Rs138 billion of taxes this year. All this is indirect tax and Wapda would have to bear the brunt, being the largest consumer of furnace oil, says an official of Pakistan Electric Power Company (Pepco). The government must take a holistic view of the situation and realize that its policies in one sector have an impact on the other. Unless it is ready to create a balance, crisis of utility bills would not go away, he warned.

During the last fiscal year, there have been three tariff revisions, recounts another employee of Pepco. The first provided a relief of 6.19 paisas, but the second took away 13.47 paisas in December 2002 when the prime minister announced a price cut. The third again brought a relief of 7.16 paisas. But the overall impact of all three revisions is calculated as minus 0.20 paisa. This was the year when furnace oil prices increased from Rs10,000 per ton to Rs15,800. No one wants the government to increase the price of electricity on quarterly basis. The only request is for controlling the price of oil. It could be done by bringing in regulatory authority. The provision about fixation of oil prices has been suspended in the Oil and Gas Regulatory Authority (Ogra) ordinance and the five distribution companies now fix the price according to an unknown formula. This cannot go on, he warned and added: “The time has come when the government must choose between financial health of the petroleum sector or financial woes of the power sector. This is unfortunate, but government’s own doing.”

When contacted to comment on the situation, Wapda General Manager (Finance) Mohammad Amjad said: “It is true that ATA is not being implemented in its true spirit. All oil price variations are being absorbed by Wapda. The last three revisions under this head have brought nothing to Wapda. The last FIP could not be implemented because of this reason and the fate of the next will also remain uncertain unless prices of furnace oil are controlled.