Low tariffs caused power crisis: WB

Saturday, September 05, 2009

ISLAMABAD: The World Bank believes that the absence of conditions from donors in the last few years has paved the way for Islamabad not to hike electricity tariff in accordance with the generation cost, leading to creation of the monster of circular debt that compromised country s ability to provide uninterrupted power to its consumers. When there were no conditions, the pricing formula to adjust electricity tariff simply disappeared, WB Senior Energy Specialist Rashid Aziz said while expressing his views in a panel discussion organised by the Pakistan Institute of Development Economics (PIDE) on the impact of circular debt at the Auditorium of Planning Commission on Friday. Member Planning Commission Shaukat Hameed pointed out that the tariff of power generation from Basha dam was proposed at 10 to 12 cents in the PC-1 so cheap electricity would not be available now. He criticised the IPPs, saying that the government guaranteed in 1996 to get electricity at 18 cents. It was also pointed out that the issue of circular debt could not be solved by injecting Rs200 billion through loans from the ADB or launching securitisation bond for overseas Pakistanis. Our banking system is not in position to arrange financing of Rs200 billion, so it requires tackling the issue, Federal Secretary Ministry of Textile Dr Waqar Masood said. Referring to an IMF document, he said the tariff is still short by 21 to 41 per cent in accordance with various estimates. The WB expert on energy, citing an example, said it is quite clear that when you go to market for purchasing a dozen eggs with a price of Rs50 but if you pay Rs30 it will not be possible to get a dozen eggs. But the same is not the case in the power sector. When asked to comment on increased level of electricity after installing of expensive Rental Power Plants (RPPs), he said that there was no gas available to fully utilise avenues of power generation.

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