Amid austerity, govt increases electricity prices as circular debt mounts


—ECC approves price hike of Rs2 per unit which will generate Rs150bn annually 

—Prepaid meters to be introduced as govt launches crackdown on power theft

ISLAMABAD: A meeting of the Economic Coordination Committee (ECC) of the cabinet has decided to launch a crackdown against electricity theft after approving an increase in electricity price by Rs2 per unit as the circular debt swells to Rs1,188 billion.

The meeting, chaired by Federal Minister for Finance, Revenue and Economic Affairs Asad Umar held at the Cabinet Division on Monday, granted approval to jack up power tariff by Rs2 per unit which will generate an additional Rs150 billion annually, Pakistan Today has learnt.

Sources the in power sector informed Pakistan Today that the increase in the power tariff was pending from the last two years as the former government of Pakistan Muslim League-Nawaz (PML-N) withhold the raise and did not pass on the hike to power consumers despite an approval by National Electric Power Regulatory Authority (NEPRA). They said that the lower prices inflated the circular debt and caused prolonged power outages across the country.

“The PML-N government stopped the raise fearing public outrage without caring for increasing circular debt,” said sources, adding that in Monday’s ECC meeting, the committee also said that the matter of circular debt will be presented before Prime Minister Imran Khan for a solution.

The ECC has advised to the issue notification of price increase within ten days, said sources.

The Pakistan Tehreek-e-Insaf (PTI) government, however, has still to decide on how and when to start a collection of newly approved power tariff from the consumers.

It is pertinent to mention here that the government is facing a cash crunch to run its daily affairs as the circular debt has mounted to Rs1,188 billion. The PTI government has embarked on an austerity campaign to keep the use of public funds in check and make more funds available for running the debt-ridden government.

The meeting further decided that electricity meters of those persons/departments and ministries will be disconnected which fail to pay their bills for consecutive three months. On the payment of their bills, they will be provided prepaid meters, efficiently decreasing power theft.

The ECC chairman directed the Power Division to take strict legal action against those officials and individual who are involved in power theft and to not show any leniency on the issue.

The government was reluctant at first on increasing the electricity price but finally gave an approval on Monday, after which NEPRA issued a notification about increase in electricity prices.

The meeting received a presentation on the issue of circular debt that has accumulated over the years to a hefty sum of 1,188 billion rupees. The committee was briefed on the impact of Industrial Support Package, Azad Jammu Kashmir subsidised units, Balochistan agricultural tube wells, FATA receivables, and the impact of existing time lag on tariff determination mechanism of NEPRA.

The ECC observed that the PML-N government had taken the decision to discontinue the provision of subsidised power supply to AJK in budget 2018 and the previous government had also decided to discontinue the industrial support package. The committee decided to bring the facts to the attention of the federal cabinet.

The ECC also decided that to cope up with the issue of fertilizer shortage in the country, while three domestic power plants will be supplied a mix of domestic gas and RLNG to start operating from September. These plants will utilise their full potential and the decision to import fertilizer will be taken after taking into account their production capacity.

The ECC further observed that fertilizer manufacturers had made windfall profits following the decision to allow export of fertilizers, resulting in the shortage in the local market and the resultant price hike. It was decided that no one will be allowed to take the undue benefit at the cost of the farmers.

Those taking advantage of the situation will be required to make compensation for the same.

On the summary moved by the Ministry of Railways for the transfer of pension liability of Pakistan Railways to the federal government, the ECC decided that a pension fund for catering for the pension liabilities of Pakistan Railways will be established. The finance division and the Ministry of Railways will work out the modalities of the fund.

On the presentation of the special audit report on payment of the circular debt of Rs480 billion by the auditor general of Pakistan (AGP), the ECC directed to hold a complete operational and financial audit of the power sector. It was decided that the AGP will complete the audit of four highest loss-making Discos in one month’s time and the audit of the entire sector will be completed in two months’ time after the approval from the cabinet.

The ECC also considered the matter of K-Electric update on National Security Certificate and issued directions to the departments concerned to formulate their recommendations for CCOP.