In a desperate bid to prevent the crippling inter-corporate debt from emerging in the future, the federal government is planning to recover 70% of power bills of provinces, which are one of the major defaulters, from their share in the federal divisible pool.
The plan comes in the backdrop of previous government’s inability to recover electricity bills from provinces including its departments and organisations.
According to sources, the proposal along with other measures aimed at clearing the circular debt was tabled before the Economic Coordination Committee (ECC) in a meeting on Thursday. However, the recovery programme could not be approved and the ECC asked the Ministry of Water and Power to bring a separate summary in the next meeting.
An official of the water and power ministry told the local media the meeting participants suggested that the government should rationalise tariff, phase out subsidies and recover the entire cost of power generation from consumers, the only exception being ‘poor’ consumers.
A huge power subsidy, which the government doles out every year, is also a major factor behind the rising circular debt.
In the current financial year which is ending on June 30, the power subsidy is estimated to swell to Rs350 billion.
It was also suggested that weighted average cost of power production should be passed on to the consumers without involving any subsidy. In this regard, the National Electric Power Regulatory Authority (Nepra) should be empowered to shift the cost to the consumers.
At present, the federal government announces base tariff due to involvement of cross-subsidies whereas Nepra – the power sector regulator – notifies fuel price adjustment every month to recover the fuel cost from the consumers.
Multilateral donors have been pressing Pakistan to empower the regulator, allowing it to automatically pass on the impact of increase in base tariff to the consumers without government inference.
“If Nepra is given powers of announcing the base tariff, a uniform tariff will be introduced and subsidies will be eliminated,” an official said.
Officials of the Ministry of Water and Power revealed that the government wanted to empower the Central Power Purchasing Agency (CPPA) to recover bills from power distribution companies so that it could make direct payment to power producers.
This proposal was also floated in the ECC meeting, but no decision was taken. “Now, a separate summary will be presented to the ECC for approval of the proposal in order to avoid circular debt in future,” the official added.
