Rs34.47 per unit uniform tariff for CPEC SEZs ready for CCOE approval

ISLAMABAD: To make phase 2 of CPEC projects a successful story, the Power Division has worked out electricity at the rate of Rs34.47 per unit to industries to be established in the CPEC Special Economic Zones.

The electricity rate has been suggested to CCOE for approval in its summary on ‘Revised the electricity supply mechanism to SEZs’.

The industry in SEZ would pay the uniform tariff but so far electricity could not be provided because of the absence of infrastructure in the special economic zones.

As per the summary, the revised electricity supply mechanism to special economic zones has been carved out with the consultation of Chinese counterparts that ensures reliable and smooth supply of electricity for sustainable industrial growth under which CPEC SEZs will be allowed to sign Power Purchase Agency Agreements (PPAs) with Discos for supplying power equivalent to peak demand for five years which will be extendable.

The CPEC SEZs will remain under the service territory of the distribution company concerned. However, the SEZs developer will sign an O&M agreement with Discos for development, operation and maintenance of infrastructure, supply of electricity and billing and collection which will eliminate the need for additional licences for the zone developer. The industrial consumers would be charged uniform industrial tariff and the developer will receive an O&M fee for maintaining the network which would be approved by Nepra in the distribution margin of Discos.

More importantly, SEZs will apply for supplier of last resort and distribution licences from Nepra under Section 23E and 20, respectively for the supply of electric power and development, operation & maintenance of distribution infrastructure within their premises or service area. The SEZs shall be obligated to procure additional power per Nepra-approved regulations and applicable codes.

The Special Economic Zones (SEZs), established under the SEZ Act 2012, face significant challenges that hinder their potential for economic growth and industrial development, including unreliable supply of electricity and delays in the development of distribution infrastructure.

The Special Economic Zone (SEZ) Act of 2012, enacted by the government, represents a significant step towards streamlining processes and promoting the ease of doing business by offering various concessions and potential benefits to investors.

The SEZs face many challenges including unreliable supply of electricity, delays in the development of distribution infrastructure and lack of compliance with the requirement of firm capacity/non-availability of generation capacity under supply licence requirements per section 23E. The Nepra Act does not cover the provision of electricity at a single point supply by distribution companies for further resale to consumers, causing delays in power connections from Discos and impeding the process for ensuring uninterrupted power supply crucial for sustained economic activity within SEZs. Even if permitted by law, this arrangement would result in higher tariffs for SEZs compared to the uniform industrial tariff of discos, as outlined in the Development Agreement of Rashakai SEZ. Moreover, the process of obtaining requisite licences also faces delays due to ambiguity regarding the source of supply for SEZs, which is essential for issuance of supplier of last resort licence to SEZs. Despite the legislative mandate, the prevailing challenges besetting the electricity supply ecosystem for SEZs necessitate a comprehensive re-evaluation of the existing supply mechanism to ensure the fulfilment of this statutory obligation within the legal and regulatory framework.