Nepra may recommend 28 percent raise in tariff

Wednesday July 01, 2009

ISLAMABAD: The National Electric Power Regulatory Authority (Nepra) is expected, by the end of July, to recommend 28 percent increase in power tariff for the consumers of discos, sources told Business Recorder. "We were in a position to finalise discos' tariff determinations by the end of June, 2009, but the hearing of 2008's petitions in the light of Supreme Court directives caused some delay. We hope the process will be completed by the end of July," sources said.

The government had agreed to pass on the raise to the consumers in two phases-17 percent in first phase, and 11 percent in the second. An agreement to this effect was contained in the second Letter of Intent (LoI) submitted by the government to the International Monetary Fund (IMF) prior to the release of subsequent tranches of the $7.6 billion standby arrangement dated 16 March 2009 where it stated that "in collaboration with the World Bank, the government has finalised a schedule for electricity tariff adjustments to eliminate tariff differential subsidies by end-June...tariffs will be raised further to result in a cumulative of 4 percent by end-June".

Prime Minister Yousaf Raza Gilani recently expressed disapproval of the proposal to end electricity subsidies by pointing out that "there is no justification to increase tariff until people are provided electricity". His comments are expected to have a negative impact on the negotiations between Pakistan's economic team and IMF staff scheduled in Istanbul on July 3.

The Ministry of Water and Power basically took the lead in suggesting deferment of the proposed increase in power tariff till such time as load shedding can be controlled. It is unclear what rationale would be provided to the IMF team to justify keeping power tariff frozen till, at least, December 2009--a deadline given by Minister of Water and Power Parvez Ashraf, claiming that load shedding would end by then.

"We are just a recommending Authority; it is the government which has to implement the decision," said an official of Nepra. According to analysts, this will be a major violation of the Letter of Intent submitted under the Stand By Arrangement (SBL) by the Government of Pakistan.

The inter-circular debt also remains an issue whose elimination was also committed by the government, as reflected in the Letter of Intent. The March 16 LoI stipulated that "we are preparing a plan to address ongoing losses on account of operational and collection losses of distribution companies, Pepco and IPPs."

TFCs were issued, but the problem was not resolved. More recently, the government has established a 'Power Holding Company', wherein the liability of the amount of Rs 216 billion, borrowed by Pepco, would be parked, and this company would directly handle the issue with banks.

(BRecorder)