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Power losses likely to reach Rs742bn

The Planning Commission estimates show that the power sector deficit will be ballooned to Rs742 billion ($7.4 billion) in the current financial year, an official said.

“The incoming Pakistan Muslim League (PML-N) government has decided to merge the ministry of water and power and petroleum and natural resources and come up with an integrated energy ministry in accordance with its manifesto.”

“Without pursuing reforms, the lingering power sector crisis cannot be overcome,” Shahid Sattar, member energy of the Planning Commission, said in his presentation delivered at the Pakistan Institute of Development Economics (PIDE) on Thursday.

“This crisis cannot be resolved on short-term basis as it at least requires two years of serious work after which improvements can be materialised,” he said, adding that the magic wand would not work to fix the problem.

When asked to comment that who was responsible for not fixing the power sector problem during the last five years, he termed bureaucrats and politicians responsible and said the Planning Commission could only recommend reforms, which were not implemented.

Citing an example, he said, the chief executives of the power distribution companies were recommended to be hired on merit and on the basis of professionalism but they were never allowed to even assuming their charge.

The circular debt has touched around Rs600 billion-mark, while the overall losses may touch Rs2,000 billion up to June 30, he said.

Energy import would be a much expensive option as, the gas consumers have to pay four times more than the present per unit price, while electricity tariff will be doubled from Rs9 per unit to Rs18.

The latest estimates of tariff deferential subsidy (TDS) for the current fiscal year is Rs396 billion, of which Rs320 billion is for the distribution companies and Rs76 billion for Karachi Electric Supply Company (KESC). Each month, over Rs30 billion is added to the circular debt on account of TDS and other cash flow issues, including lower collection, late payment surcharge to the independent power producers (IPPs), loss of fuel price adjustment and high technical transmission and distribution losses.

Sattar said that Pakistan is currently spending two percent of GDP on the power sector, which needs to be jacked up to four to 4.5 percent on an immediate basis to cater to the demand.

On the issue of gas theft, he said, the ratio of unaccounted for gas (UGF) is causing huge losses of $2.5 billion and the metres need to be changed to curb massive losses, which were caused by shortsighted policies of those who were at the helm of the affairs.

In his detailed presentation, Sattar made some startling disclosures, saying that the Bhasha Dam, which was although approved by the Council of Common Interests (CCI), would become a history, owing to variety of reasons.

“The Water and Power Development Authority (Wapda) has created misperception that hydropower projects will produce cheaper electricity. In case of construction of Bhasha Dam, the electricity tariff will stand at Rs16 to Rs18 per unit and the cost of per unit in case of Neelum-Jheleum hydropower project will be Rs14,” he said.

On the issue of Thar coal project, the member energy said that the inferred coal reserves stood at 175 billion tons but the proven reserves were less than one billion tons.

“In order to end the power crisis, Pakistan will have to focus on nuclear civil energy and producing electricity through coal,” he added.

Disclosing whopping figure of power sector deficit at Rs742 billion for FY 2013, he said that there were three major heads causing such a huge loss to this cash-starved sector as the cost not covered in tariff determination resulted in losses of Rs277 billion, or 37 percent, of overall losses, he said.

The cost of delays in tariff determination and notification caused Rs60 billion loss, heat rate differences at power generation companies caused Rs6 billion loss, line losses beyond the National Electric Power Regulatory Authority (Nepra) limit caused Rs29 billion loss, non-recovery from consumers, including government and its attached departments Rs107 billion. The second reason for losses is tariff deferential subsidy of Rs365 billion during the ongoing financial year and another major reason is non-implementation of the fuel price adjustment that resulted in a loss of Rs100 billion, Sattar said. The subsidies amount was largely benefiting rich and influential and lifeline consumers are just utilising 0.3 percent of the total subsidy amount. In case of one to 100 units, the subsidy of 11.1 percent is being utilised, while consumers using units from 101 to 300 are getting 38.5 percent share in the subsidy amount, he said.

Other major beneficiaries of subsidies for the power sector included agriculture sector with a share of 25 percent, bulk consumers 0.9 percent, industrial consumers 5.9 percent and commercial consumers 6.1 percent.

Sattar also criticised Nepra for not regulating the sector effectively and said that it was simply turned into tariff determination authority and they did not have the capacity to understand other issues being confronted by the power sector.

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