Transfer of DISCOs inefficiencies cost to power consumers unfair

Anjum Nisar says frequent hike in energy rates to adversely impact industrial production:

Federation of Pakistan Chambers of Commerce & Industry’s Businessmen Panel has resented the recent move of National Electric Power Regulatory Authority (NEPRA) to jack up electricity rates, lifting average power tariff to Rs18.09 per unit, saying the decision will cause an additional burden of at least Rs90 billion on consumers.

FPCCI’s Businessmen Panel Chairman Mian Anjum Nisar stated that the frequent increase in electricity cost and fuel prices on behest of the International Monetary Fund would not only make Pakistani products uncompetitive in the international market, but would also dent the prime minister’s vision of lowering the cost of industrial production.

Condemning the government’s move, he said the increase was being done to meet the conditions of the International Monetary Fund, terming the transfer of the cost of inefficiencies and transmission constraints of power distribution companies to the consumers as unfair. He said the increase in power and fuel prices will increase the cost of production for the industrial section which in turn will impact the ease of doing business and exports. This will ultimately hit the economy as envisioned by the Prime Minister, the FPCCI ex- chief maintained.

The BMP Chairman said that the recent price-hike was announced on the plea of a fuel price adjustment for the first, second and third quarters of the current and last fiscal years, putting an additional burden of billions of rupees on trade and industry.

Quoting the NEPRA’s own reports, he revealed that an additional Rs193.49 billion were collected from consumers as a fuel price adjustment on the plea of higher costs of generating power during Jan-July 2021. He said that in May, electricity became cheaper by Rs0.26 per unit due to fuel price adjustment while in June it became cheaper by Rs0.19 per unit but consumers could barely get relief of Rs4.5 billion.

He maintained that the NEPRA had increased power tariff by Rs1.38 per unit for July 2021 under monthly fuel price adjustment mechanism, imposing an additional burden of Rs21 billion on consumers, which is very unfortunate.

He rejected the government’s move of raising power cost, besides increasing rates of petroleum products twice a month to qualify for the revival of the stalled $6-billion IMF loan program.

Anjum Nisar said that the regular attempts of economic managers to increase oil prices along with power and gas tariffs would ultimately nullify the government’s step for reduction in production cost, including industrial power tariff for SMEs.

Anjum Nisar said it was imperative for the government to make power and gas tariffs for domestic as well as export sectors compatible to tariffs being applied in neighboring countries. “The industry is presently paying more than double the power price as compared to regional tariff of about 7.5 cents per unit in neighbouring countries.”

He said the country could improve its economic growth and job creation by overcoming inefficiencies in its power sector through focus on eliminating waste and shifting towards cleaner energy, besides attracting private investments.

Power sector reforms should be a top priority for a quick yield of economic gains, Anjum Nisar said, adding that reforms that focus solely on rising energy prices had already led to an excessively high cost of electricity because of inefficiencies in the system.

The FPCCI’s ruling group chief further noted the overall line losses of distribution companies in the public sector remained unchanged at 18pc for the last several years while the current Unaccounted for Gas (UFG) losses of gas companies were causing a loss of more than Rs50 billion to the end consumers, burdening the industry with billions of rupees cost additionally.

The government will have to get rid of expansive thermal power generation, as hydropower’s share of installed generation capacity fell from around 67% in 1985 to 27% in 2021. Pakistan’s reliance on fuel oil for power generation contributed to the liquidity crisis in the country’s power sector. He opined that increase in tariffs alone could solve the fiscal problems in the short-term, but it cannot address the energy sector issues on a long-term basis.

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