Industries in Punjab bear power theft under price equalisation

LAHORE: Punjab is being discriminated in power and energy supplies as its consumers bear the power theft of other provinces under price equalisation concept, while their industries are denied price equalisation in gas for which they pay a two times higher price.

It is a documented fact that the transmission and distribution losses in the electricity distribution companies of Punjab are very low compared with the losses incurred by electricity distribution companies in other provinces.

Few years back, power tariff was determined by Nepra on the basis of the cost incurred by these companies individually, and the consumers of each region paid tariff accordingly. This was the reason that the electricity rates in all power distribution companies varied substantially.

The consumers of most efficient companies paid much less tariff than the consumers of most inefficient companies. Since most inefficient companies were located outside Punjab, the power tariff in this province was the lowest.

During the last tenure of PPP government, it was decided that there should be a uniform tariff all over Pakistan. To achieve this objective it was determined that all inefficiencies would be averaged out and a uniform tariff would be applied in all provinces.

A tariff rationalisation surcharge of Rs3.40 per unit was imposed to cover up the inefficiencies of other provinces. This meant that the power consumers in Punjab bear the cost of inefficiencies of other provinces that were paying much higher tariff because of rampant theft and losses.

The industrial consumers with dedicated feeders in Punjab incurred zero to one percent line losses. They along with domestic consumers of Punjab are subsidising the inefficient and corrupt practices of other provinces.

When it comes to natural gas, the domestic consumers in Punjab pay the same charges as paid by the domestic consumers in other provinces. However, the industrial sector of the province is denied gas which is rarely available in the system as the first right of use is constitutionally awarded to the provinces that produce gas.

Sindh, Balochistan and KP produce gas and their industries enjoy uninterrupted 24/7 supply of gas round the year.

The present regime established LNG terminals with the assistance of private sector. It started importing LNG from Qatar under a binding agreement.

Under this agreement, the price of LNG is linked to a certain percentage of Brent oil in the global market. If Qatar defaults, it will have to pay a heavy penalty to the government. If Pakistani government fails to buy the agreed amount of gas it will have to bear very heavy penalty for default.

The imported LNG was added into the Sui Southern and Sui Northern companies systems and supplied to the industries as well as CNG stations in Punjab at floating price that is in accordance with the price formula agreed between the government of Pakistan and the private sector buyers.

When the global oil prices were low, this imported gas cost Punjab industries the same in the range of plus-minus five percent when compared with the other three provinces.

As the crude oil prices started increasing, the imported gas prices went high. The rate of gas in other provinces until recently was Rs600 per mmcfd plus Rs200 Gas infrastructure Development Surcharge.

The industries in these provinces have obtained stay order against GIDC and for over a year were only paying Rs600 per mmcfd. Punjab industries currently pay Rs925 per mmcfd for imported gas. This price is bound to go higher as the crude oil prices increase globally.

Last month, the federal government announced decrease of Rs200/mmcfd for domestic gas. The notification has not been issued yet, but when implemented, the industries in other provinces would pay two times less than industries in Punjab.  The price differential for the textile industry only comes to Rs70 billion a year.

Punjab industries are surprised by the lower gas rates for other provinces. A prudent decision would have been to calculate the weighted average of LNG and domestic gas, which should have been applied uniformly all over Pakistan.

The unified average would come to Rs575 per mmcfd. So instead of reducing the domestic gas rates by Rs200/mmcfd, the government could have mollified industries in other provinces by lowering gas rates by Rs25/mmcfd, providing a level playing field to Punjab industries.