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    Monster of Rs2.6tr circular debt will stay despite levying of Rs3.23/unit surcharge

    March 17, 2023 - Nation


      National Electric Power Regulatory Authority (Nepra) Chairman Tauseef H Farooqi Thursday noted that the levying of Rs3.23 per unit surcharge would only pay off the interest on the power sector loan, while the monster of Rs 2.6 trillion circular debt will stay.

      Despite finalising circular debt management plan, the Power Division was unable in a NEPRA hearing to give a clear cut mechanism for circular debt reduction from the existing Rs2.6 trillion, removal of Discos inefficiencies and losses reduction. The Nepra on Thursday conducted public hearing to consider petition of the federal government to increase rate of power surcharge on the consumers. The federal government had submitted a new petition to Nepra relating to hike in power surcharge from Rs 1.43 to Rs 3.23 per unit for the next financial year.

      In a petition, the federal government said that the previously approved power surcharge could not meet the requirement to pay off interest on circular debt. During hearing, it was informed that Rs 3.23 per unit surcharge will continue beyond the next financial year,till the circular debt is cleared.

      Chairman Nepra asked that whether surcharge will only cover mark up or it will reduce the principal amount as well?

      Officials of Power Division were unable to provide a clear cut plan for circular debt reduction. The Power Division came under fire by officials of Nepra and consumers over seeking increase in rate of power surcharge from the next financial year to pay off interest on circular debt and losses of the power distribution companies.

      Nepra has already allowed the government to recover Rs 1.43 per unit surcharge from the power consumers from the next financial year. However, the government in a petition said that it was not enough to meet requirement and requested an increase of Rs 1.80 per unit to Rs 3.23 per unit on the electricity consumers from the next year to pay off debt and cost of power theft of inefficient power companies. The federal government had requested to impose Rs 3.23 per unit surcharge on permanent basis from the next financial year.

      The increase in surcharge rate will result in passing on Rs 335 billion burden on electricity consumers across the country. 'How far will this matter go, Member Nepra-Khyber Pakhtunkhwa Maqsood Anwar questioned. Why is it so early for next year's power surcharge, Chairman Nepra question and pleaded the federal government representatives 'let the people breathe a sigh of relief.

      The problems of power sector are serious and circular debt is increasing rapidly, officials said.

      Why should people be punished for the poor performance of Discos? Member Sindh Rafiq Shaikh questioned and lashed out at power ministry officials over requesting further increase in power surcharges. He called for resolving the problems of electricity companies.

      We are also here to protect the rights of the users, he said.

      Member Balochistan Nepra, Muthar Niaz Rana also expressed concern over poor performance of power distribution companies and called for addressing the governance issues within the companies.

      There is a lot of criticism on us, Member Balochistan said, adding that what confidence should we give to the customers, when will the situation be fixed? Earlier, the federal government had requested to increase the power surcharge by Rs1.43 per unit for the next financial year. Now, the federal government has submitted a request to increase the power surcharge to Rs 3.23 per unit, NEPR authorities said.

      Member Punjab Nepra asked the Power Division official not to mislead regarding imposition of surcharge. She said that the federal government can levy a surcharge. She asked for explaining the matter. Power Division officials said that circular debt stood at Rs 2600 billion which included 'payments' to IPPs and Power Holding Company's 'debt'. It is not Nepra's job to impose this surcharge, chairman Nepra said, adding that imposition of power surcharge will not resolve the issue of circular debt any more. Is it right act that the ministry that is controlling the power sector, chairman Nepra questioned. In the current situation, the tariff of the industrial sector will reach Rs 50 per unit, Tanveer Bari, representative of Karachi Chamber of Commerce and Industry said. Bari said that Karachi Chamber rejects request for surcharge increase.

      Nepra will review the data and issue a decision. Power Division officials said that government was facing problems in paying off dues to Chinese coal-fired power plants. They said that Power Division had submitted a payment plan to IPPs to the Finance Division. According to petition, the federal government has requested that the already approved surcharge of Rs1.43 per unit was not enough to meet the electric services obligations of government.

      It is worth mentioning here that the National Electric Power Regulatory Authority has already allowed the federal government to impose an additional surcharge of Rs. 3.39 per unit and Rs. 1 per unit from Mar-Jun 2023 and Jul 2023 to June 2024, respectively, with a cumulative impact of Rs. 149 billion on power consumers. With the application of an additional Rs. 3.39 per unit, the total surcharge becomes Rs. 3.82 per unit for the four months of 2022-23, having an impact of Rs. 75 billion.

      For FY2023-24, the additional surcharge of Rs. 3.39 per unit will be reduced to Rs. 1 per unit to cover the additional markup charges of PHL loans not covered through the already applicable FC surcharge of 0.43 per unit. The total surcharge becomes Rs. 1.43 per unit for FY 2023-24, having an impact of Rs. 74 billion. In view thereof, the Authority has decided to allow the application of the surcharge to be recovered from different categories of consumers of K-Electric, for the period from March to June 2023 and for FY 2023-24, to cover the markup charges of PHL loans. The Power Division said that the additional surcharge is intended to cover the markup charges of PHL loans not covered through the already applicable FC surcharge of Re. 0.43/unit. It was also explained that with these additional surcharges, an additional amount of Rs. 75 billion will be billed for the period from March to June 2023, against which around Rs. 68 billion will be recovered at an expected recovery rate of 90%.


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