Circular debt: Govt wants powers to embed more surcharges into tariff

ISLAMABAD: In line with the understanding reached with the IMF, the government is trying to have powers to impose more surcharges in the consumers tariff not only to fund future projects of paramount importance but also meet financial obligations of the government in the power sector.

The consumers will also pay the principal amount of loans apart from debt servicing in the shape of surcharges with an aim to settle the circular debt that has hiked to Rs2.4 trillion. And more importantly the surcharges to be levied by the government to this effect will not be made public in the electricity bills, rather it will be made part of expenditures to be charged by DISCOs as cost of service or part of Distribution Margin.

All electric power distribution companies (DISCOs) will be having a uniform tariff based on their consolidated revenue requirements. The word surcharge has been redefined as cost of service that will be embedded in the consumer tariff. And now sovereign guaranteed loans, such as Sukuk, or principal amount of loans and interest payments will be paid by consumers in the shape of surcharges which will be part of the tariff.

Surcharges will be imposed for funding of any public sector project of public importance and fulfillment of any financial obligation of the federal government with respect to electric power services.

This all has been unfolded in the report furnished by the 21-member Standing Committee on Energy (Power Division), headed by Chaudhary Salik Hussian, on the Bill to amend "The Regulation of Generation, Transmission and Distribution of Electric Power Act, 1997". However, members belonging to Pakistan People’s Party Parliamentarians, Shazia Marri and Syed Ghulam Mustafa Shah, strongly opposed the passage of the bill namely "The Regulation, Generation, Transmission and ‘Distribution of Electric Power (Amendment) Bill, 2020'. The bill was moved by the government proposing certain changes to Act No. XL of 1997.

The PPPP is of the view that the bill needed to be taken to the CCI for input from the provinces. This bill proposes additional surcharges for further projects and for the repayment of financial obligations of the federal government. The people of Pakistan are already burdened due to record high inflation and the cost of living has skyrocketed. Given the current inflation and inflated electricity bills, the passage of such a legislation will further harm the public.

The amended bill namely "The Regulation of Generation, Transmission and Distribution of Electric Power Act, 1997" with the input from 21-member Standing Committee on Energy has so far been blocked in the NA Committee on Energy, but the government is still busy lobbying to get this bill passed by the NA committee.

One of the top officials at the Power Division explained to The News that with the imposition of surcharges, the government will also make timely payment to power houses against electricity purchase and would also meet its financial obligations related to electric power services secured through issuance of sovereign guarantee.

More shockingly, the invisible surcharges will be imposed maximum by up to 10 percent of the revenue requirement of all electric power suppliers, engaged in electricity supply to end consumers.

Under the proposed amendment in the bill, the timely submission of annual or multiyear petitions and quarterly petitions, as specified by the NEPRA Authority, will be ensured and it will also be ensured that timely submission of all information and data to the uniform tariff applicant be made, so that the uniform tariff application duly supported by consolidated accounts is moved by it within a period of fifteen days of intimation of tariff by the Authority under sub-section 4 of section 31 of this Act.

To a question, he said that right now, 33 percent of bills to end consumers is because of taxes and surcharges in addition to electricity duty and PTV fee.

In the electricity bills, the consumer is currently paying the Financing Cost (FC) surcharge of 43 paisa per unit to ensure collection of Rs30-32 bn for debt servicing of the loans parked at Power Holding Private Limited taken for the power sector. The consumer also pays Tariff Rationalization (TR) surcharge of Rs1.43 per unit to reduce overall power subsidy on the budget and to keep the tariff uniform across the country through cross-subsidy. The government has done away with 10 paisas per unit Neelum-Jhleum Surcharge as the Neelum Jhelum Hydropower project has completed its CoD (commissioning of date). Apart from current surcharges, the consumers also pay in the electricity bills five taxes such as GST, Income Tax, sales tax, further tax and extra tax.