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January 22, 2021

‘Fallout of PML-N govt power policies’: Power tariff up by Rs1.99 a unit

Top Story

January 22, 2021

‘Fallout of PML-N govt power policies’: Power tariff up by Rs1.99 a unit

ISLAMABAD: The government on Thursday increased the power tariff by Rs1.95 a unit to overcome the deficit inherited from the former PML-N government due to its flawed policies and to keep the industrial wheel in motion.

Two major achievements of the PTI government in the power sector are retirement of 50 percent of old, inefficient state-owned power plants and agreements with the IPPs, which will reduce burden on the power sector by over Rs800 billion over the next two decades.

The new rates would be applicable once the National Electric Power Regulatory Authority (Nepra) issued a notification.

Federal Energy Minister Omar Ayub announced this while addressing a press conference here. He was flanked by Planning and Development Minister Asad Umar and PM’s Special Adviser on Power Tabish Gauhar.

Omar said the PML-N government’s flawed decisions were the cause of rise in power tariff. He said the PTI government was strapped for cash during the COVID-19 pandemic and an increase in power tariff was inevitable but the government acted as a cushion and gave a subsidy of Rs473 billion to the power sector last year.

Omar said the PTI government inherited an unsustainable level of capacity payments from the PML-N government. The previous government, he continued, inked agreements with the IPPs pursuing bad intentions and corrupt practices.

“Owing to these agreements, the increase in power tariff in one year alone (2019-2020) on account of compulsory capacity payments would have been Rs2.18 per unit but the present government decided to increase the rate by just Rs1.95 per unit in 2021, he said.

“The previous government planted landmines for us with its policies, causing us to get into trouble, as we try to manage the country’s affairs. If we look at their policies, the increase in the power tariff stands at Rs2.18 per unit,” he added.

“We have to somehow overcome the deficit left behind by the PML-N government. We have to make this decision to ensure that industries continue to function,” he said. Giving details of capacity payments to IPPs, he said Rs185 billion was paid to IPPs in 2013, Rs468 billion in 2018, Rs642 billion in 2019; Rs860 billion in 2020 and the payment would reach Rs1,455 billion in 2023.

“These are the landmines that the previous government gifted to our nation,” he added. Talking about the recent major power breakdown in the country, he said its major reason was human error and technical.

As per initial investigation, six to seven officers/officials have been suspended, he said, adding that high-powered investigating committees of NTDC, Nepra and the Power Division had been constituted to look into the underlying causes so as to avert any such activity in future.

Tabish Gauhar highlighted the key initiatives undertaken by the government to improve the power sector and reduce circular debt. The government’s negotiations with IPPs are in the final stage to convert the already signed MoUs into final binding contracts, which would reduce burden on the power sector by more than Rs800 billion over the next two decades.

“Agreements with the IPPs regarding the ‘take and pay’ clause will end by the first of next month,” he said. “Along with an even greater reduction in the rate of return on the government’s own power plants, we expect a total reduction of Re1 to Rs2 per unit in the coming years,” Tabish said.

All of these agreements and any payments thereunder, he said, shall strictly be in accordance with the law and applicable regulations. He also announced that the government will shut down old power plants with a capacity of 3,500 megawatts.

He said the government’s recently announced industrial tariff package to boost power demand had shown encouraging results in the first couple of months and this trend was expected to continue in the coming days.

The Cabinet Committee on Energy (CCoE) has also decided to impose a moratorium on gas supply to captive power units from February 1 and incentivize them to migrate back to the national power grid.

Discos are expediting all pending new industrial connections. He the federal government intended to work closely with the provincial governments to share the burden of cut in power theft and to improve recoveries in their respective jurisdictions besides introducing private sector participation and mindset at the board and management levels.

Tabish said the monopoly of Discos (power distribution companies) will end in the next two to three years. Asad Umar said, “We had to face problems related to exports due to the previous regime, but a positive outcome is that exports are witnessing a recovery, while the economy is also on an upward trajectory due to the successful policies of the incumbent government”.

Pakistan’s economy has been improving for the past few months, as growth and production of industries are increasing. He said the current account was now in surplus and not under deficit adding that the PTI government inherited issues from the previous government in the power sector.

Later talking to The News on phone, Tabish Gauhar said Rs1.95 per unit hike in power tariff will be enforced once Nepra made it part of schedule of tariff (SoT). He said with the hike in tariff, uniform tariff will go up to Rs15.5 per unit and even after increase of Rs1.95 percent, the gap of Rs1.39 per unit was still there between the sale tariff and Nepra’s determined tariff of Rs16.89 per unit.

Asked when the government will announce the remaining increase in tariff of Rs1.39 per unit, he said prime minister was the only authority to decide on the issue. To a question, he said the IMF was not forcing the government to announce the remaining increase in the current financial year.