Bad governance main reason for high power tariffs in Pakistan

Bad governance main reason for high power tariffs in Pakistan
afp

ISLAMABAD: Experts at a seminar on energy at Institute of Policy Studies, Islamabad were unanimous in the view that the main reasons for the high tariff rates in resource-rich Pakistan were governance related due to the short-sightedness of policymakers, corruption, mismanagement, and unavailability of the right people at the right places.
Expert blamed the pro-furnace oil government policies for power generation for the current energy crisis and warned that the fuel cost in 1994 policy of Rs 0.60 per kilowatt-hour (kWh), which increased to Rs 15 in 2013 may go to Rs 100 in 2025 if the international oil prices continue to increase with the same pace. 
The seminar titled, ‘Rising Electricity Tariffs - from NEPRA’s Determination to Consumers’ Electricity Bill’ was addressed by senior energy expert Salahuddin Rifai, tariff expert and NEPRA Assistant Director Syed Salman Rehman, IESCO’s Manager Customer Services Waheed Akram, and IPS Associate and Coordinator of its Tawanai programme Ameena Sohail. IPS-National Academic Council member and former water and power secretary Mirza Hamid Hasan chaired the programme.
It was highlighted that the existing power tariff in the country was Rs 14 and with the addition of 17 percent general sales tax (GST) and 3.5 percent excise duty it becomes Rs 16.95, which was the highest in the region.
Criticising the short-sightedness of the Pakistan’s energy managers the expert speakers and participants of the seminar viewed the overwhelming share of fossil fuel-based power generation as the main cause of the exorbitant per kWh tariff in Pakistan. It was revealed that in India and Bangladesh the tariffs for the same unit were Rs 7.36 and Rs 5.47, respectively. Even in the US it was equal to Rs 8.59.
Presenting an overview of the country’s energy planning since the beginning, Rifai informed the participants that Water and Power Development Authority (WAPDA) started at 118 megawatts (MW) installed capacity, 700 gigawatt-hour (GWh) generation, Rs 70 million revenue and 270,000 consumers. 
The power sector of the country was self-financed at the beginning. Till mid-1980s the power generation of WAPDA increased to about 5,700 MW through projects build out of its own profits and government loans on 17-18 percent compound interest. The government stopped providing loans to WAPDA in 1985.
He further informed that the load growth during 1960 to 1985 was tremendous - up to 18 percent annually. The World Bank undertook to finance 60 percent of development on condition of 40 percent self-financing by WAPDA out of its own profits. In 1985, the concept of private power generation was introduced and the federal government floated the first tender.
He lamented that in 1988 the first MoU was signed for the furnace oil-based 1,292 MW Hubco plant out of tens of offers and Pakistan became the first country in the Third World to have private power generation, that too on furnace oil and exorbitant costs. He also criticised the financial terms of the Hubco agreement agreed by the government of Pakistan.
Presenting data on achievements of targets against planned targets in installed capacity of power generation from 1955 to 2010, Rifai told that the progress from the first five-year plan (1955-60) to the eighth five-year plan (1993-98) was quite satisfactory. Unfortunately, however, no addition was planned in the ninth five-year plan (1998-2003) and only a deplorable 6.0 percent target was achieved against the planned 7,880 MW in the Medium Term Development Framework (2005-2010). He said due to this failure, today, the electricity shortfall has reached 3,916 MW.
He blamed the pro-furnace oil government policies for power generation for the current energy crisis and warned that the fuel cost in 1994 policy of Rs 0.60 per kWh, which increased to Rs 15 in 2013 may go to Rs 100 in 2025 if the international oil prices continue to increase with the same pace. 
NEPRA’s Rehman apprised the participants of the tariff determination mechanism of the authority and claimed that despite regular public hearings for tariff determination there was very little contribution on the part of consumer organisations and representatives in the process.
IESCO’s Akram informed that the distribution company was collecting more than 100 percent bills from private, commercial and industrial customers and around 25 percent of an average bill also consists of various taxes that the government was collecting through the DISCOs. However, he informed, the recoveries from the government sector were only 53 percent. Interestingly, the Azad Jammu and Kashmir government pays only Rs 2.2 per unit to IESCO against the NEPRA’s determined tariff of Rs 12 for government departments, he disclosed.
Ameena Sohail urged NEPRA and other power sector organisations to make meaningful efforts to create awareness among the consumers about tariff determination and billing.

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