LAHORE, Oct 23: The Wapda, in a policy shift, has opposed the automatic tariff adjustment (ATA) formula and asked the government not to increase six paisa per unit granted by the National Electric Power Regulatory Authority (Nepra) on Oct 17 made under the ATA mechanism.

In a letter to the ministry of water and power, copies of which were sent to the chief executive secretariat and the ministry of finance, the Wapda chairman has pointed out that the formula was ill-advised and has asked the government to abolish the ATA mechanism.

The letter contains Wapda’s grievances against the ATA system and reasons for its annulment.

The authority claims that the Wapda and the independent power producers consumed around 4.5 million tons furnace oil annually, however, the former spent one-third of its income on this head. Any corresponding price rise hit the cost of thermal power production, which, at present, constituted around 70 to 80 per cent of its total power production. This left the authority with no option but to pass the burden on to the consumers. But the Nepra has seldom allowed it make sufficient increase to offset the total loss. The latest increase of six paisa is one example.

It added that during the past nine months, the price of furnace oil had gone from Rs 12,642 per ton up to Rs 14,262 per ton. It pointed out that on Sept 30, an increase of Rs 1,620 or 13 per cent was made. Since July, the price of oil in the international market had come down from $34 per barrel to $27 and the rupee had appreciated considerably. But, the price of furnace oil had kept its upward trend because of the government levies and taxes. This increase put an additional burden of Rs 5.451 billion on Wapda. However, the latest increase of six paisa per unit would fetch only Rs two billion, leaving a gap of Rs 3.451 billion.

It added that the increase, on the one hand, did not make up for Wapda’s loss and, on the other, gained the authority an unpleasant position. This situation can’t be allowed to continue at the cost of Wapda’s public image and financial health.

In a separate letter to the Oil and Gas Regulatory Authority (OGRA), the Wapda has invited its intervention for controlling the ever-increasing price of the fuel.

“Electricity tariff in our country is one of the highest in the region, even higher than a few of the developed countries. This position may not be sustainable for our economy anymore. The government’s bid to provide basic necessity to the deprived sections of the economy at high pace requiring more subsidies, simultaneously addressing issue of higher industrial and commercial power tariff, basically to provide level playing field to the industry in the wake of globalization, requires serious reform effort by all concerned. In this connection, among other factors, controlling input cost, specially the fuel prices, has emerged as one of the most critical issue.”

According to a Pepco official, this situation, together with intense public pressure against any further rise in tariff, has forced the Wapda to reconsider its earlier fight for ATA increases. Of late, it has realized that instead of fighting for regular increase in tariff under different pretexts, the authority must increase pressure on government to control oil prices. Owing to this trend, tariff increase was only a symptomatic treatment and does not cure the disease, which is oil prices.

The latest increase given by the Nepra came under tremendous pressure from the World Bank, not from desire to benefit Wapda. The Nepra would also be under the same pressure in future also. This provides the Wapda with an opportunity to fight for keeping the tariff at current level and correct its public image, he said.

“If the government has decided to sink the whole country below the poverty line in order to keep its own coffers healthy, why should Wapda be fighting a lost battle,” says an OGRA official. Rather, it should join hands with the government and let Wapda sink faster than the government anticipates and allow people to press government in correcting its methods.