Centre faces Rs50bn annual loss over ‘cheaper’ electricity to AJK

ISLAMABAD: The government of Pakistan is braving an annual loss of Rs50 billion in the provision of cheaper electricity of Rs2.59 per unit to Azad Jammu & Kashmir (AJK) which is no longer sustainable, said an official of the Power Division.

“We have offered the AJK government electricity at Rs22 per unit against the basket price of Rs42 per unit in Pakistan but the AJK premier has refused to budge, and is asking for the continuation of the existing tariff of Rs2.59 per unit,” the senior official of the Power Division told The News.

“Pakistan is supplying the electricity valuing Rs56 billion, but in return, AJK pays back Rs6 billion incurring Rs50 billion deficit to the federal government every year.”

The AJK government is of the view that the Mangla dam and Neelum-Jhelum project as well as other hydropower projects are generating electricity from the AJK territory, and the AJK people deserve some share of hydel power generation from their territory in the shape of Rs2.59 per unit.

According to the official, the federal government is of the view that hydropower projects in AJK ensure electricity for 4 months while highly costly thermal power is provided to the AJK consumers in the remaining 8 months.

The Power Division has offered the electricity at Rs21.52 per unit to the AJK government as against to Rs42 per unit in Pakistan. The power division wants to sell the electricity at Rs21.52 per unit by deducting the capacity payment, transmission and distribution cost as well as operation and maintenance cost. But the AJK government is adamant to pay only Rs2.59 per unit which is no longer possible for the federal government as it is causing an annual loss of Rs50 billion.

The central government, he said, some years back established 3-4 committees on technical issues, finance, and human resources. Keeping in view the recommendations of the three committees, the power division has offered AJK government electricity at Rs21.52 per unit.

“A tripartite agreement between AJK, Power Division, and Finance Division which was to be signed in August 2023, could not be inked so far in the wake of obduracy by the AJK government. Now a new committee has been established comprising the secretaries of Finance, Power Divisions, Defense, and officials from SECP and Nepra to find out the way forward.”

The federal government wants NTDC to directly supply 2,182 million units of electricity to AJK, eliminating the role of DISCOs and raising the invoice based on the prevalent basket price. AJK will pay CPPA-G the full amount as per the invoice. The Ministry of Finance will allocate a grant-in-aid of Rs25 billion to cover the anticipated shortfall in the payments to be made by AJK to CPPA-G.