ISLAMABAD: The Economic Coordina­tion Committee (ECC) of the cabinet decided on Monday to notify an outstanding tariff determined by the power regulator that would increase average electricity rates by about Rs2 per unit, based on tariff differential subsidy earmarked in the budget, with financial impact of around Rs200 billion.

A meeting of the ECC presided over by Finance Minister Asad Umar also ordered yet another and a deeper — operational and financial — audit of the power sector, particularly Rs480bn payments made in 2013 by the PML-N government to resolve the issue of circular debt at the time.

The meeting was told that circular debt had accumulated over the years to a hefty sum of Rs1,178bn, including fresh flow of Rs596bn and old stock of Rs582bn parked in the special purpose vehicle — Power Holding Company Ltd.

Move will increase electricity rates by Rs2 per unit; complete audit of power sector ordered

A senior official told Dawn that the next meeting of the cabinet on Wednesday to be pre­sided over by Prime Minister Imran Khan would decide how much of this increase could be absorbed in subsidy allocated in the budget. He said the tariff determined by the National Electric Power Regulatory Autho­rity (Nepra) would increase by about Rs3.80 per unit to Rs15.30 from Rs11.50. He said it was estimated that effective average power tariff to be paid by the consumers would increase by about Rs2 per unit based on tariff differential subsidy earmarked in the budget.

The finance minister asked the power and finance divisions to reconcile numbers on the flows and blockades of the revenue streams in the power sector on Tuesday to share these with the federal cabinet for a final decision on Wednesday.

The official said the Nepra-determined tariff for the fiscal year 2014-15 and 2015-16 could not be notified by the power division despite lapse of almost four years. The division and power companies had filed a request for review which was rejected by the regulator. The government challenged the decision in the court, which remanded the case back to the regulator to resolve the matter. The reg­u­lator delivered its determination in Oct­ober last year as desired by the power division, but a final tariff could not be notified.

During a presentation by the power division, the ECC was given a rundown on the impact of industrial support package, Azad Jammu and Kashmir subsidised units, Balochistan agricultural tubewells and Fata receivables, as well as the impact of the existing time lag on tariff determination mechanism of Nepra. The ECC decided that there was no reason to keep sitting on tariff determination and more so when it was providing relief in cash flows to the power sector marred by circular debt.

The committee continued to debate windfalls allegedly earned by the fertiliser industry and constantly increasing power sector circular debt. The finance minister told the meeting that the fertiliser industry had earned Rs14bn windfall from gas subsidy last year and was recoverable.

The ECC did not take a decision on average 30 per cent gas price increase determined by Ogra to resolve the issue of circular debt in the gas sector. It observed that the PML-N government had decided to discontinue the provision of subsidised power supply to AJK in the budget and also to do away with the industrial support package. The meeting decided to bring the facts to the attention of the cabinet.

The ECC decided to disconnect the meters of those departments, ministries and consumers who failed to pay their bills for three consecutive months. On payment of their bills, they will be provided prepaid meters.

On presentation of a special audit report on payment of circular debt of Rs480bn by the Auditor General of Pakistan in 2013, the ECC ordered complete operational and financial audit of the power sector. The AGP was asked to complete the audit of four highest loss-making power distribution companies within a month. The audit of the entire power sector will be completed in two months after an approval by the cabinet.

The ECC decided that to cope up with the issue of fertiliser shortage in the country, three domestic power plants would be supplied a mix of domestic gas and RLNG facilitating them to start operation this month.

Published in Dawn, September 4th, 2018