The Power Division has claimed that power sector has improved its performance during the last two years which is evident from the fact that the recoveries which remained in the range of 88%-89%, crossed 93% consecutively in 2015 and 2016, the highest in the history of the power sector. The T&D losses which were around 19% in 2014 came down to 17.8% in December 2016.
These two accounts have provided positive cash flows to the power sector totaling Rs 116 billion in the past two years. Similarly, dependence of power sector on the GoP subsidies has considerably declined in the recent past due to decrease in cost of generation and lessening tariff differential which constitutes the subsidy.
The sources said, Tariff Differential Subsidy (TDS) which was 2.4% of GoP in 2012-13 was brought down to 0.3% of the GDP in 2016-17. Similarly, overall generation mix was also planned to have renewable energy projects which would provide necessary diversification and increased energy security to the sector.
The introduction of Re-Gasified Liquid Natural Gas (R-LNG) projects was also a step towards, adding relatively clean and cheaper energy generation resources. However, despite improvement in the sector performance, the outstanding liabilities of power sector towards sectoral entities, typically known as circular debt has increased.
A number of issues have contributed towards this accumulation viz lesser regulatory benchmarked performance (both losses and recovery), non-realization of subsidies, delayed determinations of tariff for end consumer (court stays), nonpayment by provincial governments etc. Another major factor that contributed to the building-up of the circular debt during the last financial year has been the quarterly adjustments not determined by the regulator. Although, such determination has been done and is in process of notification, but it has contributed more than Rs 70 billion to the circular debt, which could have been collected from the end consumer.
The sources maintained that under government''s policies, subsidies are given to various categories of consumers. Out of these subsidies, more than Rs 30 billion was cross subsidized within the tariff regime and another Rs 70 billion was collected as surcharge to reduce the burden on the exchequer. Non-cash settlements of subsidies under various heads would clear liabilities of GoP, but does not serve the purpose of payments to the service provider entities ie PSO, IPPs, NTDC, WAPDA, gas companies etc.
The Power Division proposed that already approved amount of Rs 80 billion by the ECC for the purposes of rolling-off of existing facilities of: (i) Rs 15.00 billion, (ii) Rs 40.00 billion and (iii) Rs 25.00 billion respectively may be utilized towards fresh facility through Power Holding (Private) Limited. A portion of this new facility would be used to pay off the principal due amounts of the three facilities due till March 2018 and balance would be used for payment to CPPA-G to discharge its liabilities against power sector entities, under the same arrangement as with previous facilities. Further, the roll-over of the exiting three fore-mentioned facilities, for another two years, would be taken up towards the end of the current financial year. The servicing of the new proposed facility as well as the principal amount would be done through imposition of surcharge @ 70 paisa per unit after approval of Nepra. For the interim (six months) or tariff determination, whichever is earlier, the mark up servicing would require GoP support, and it would be treated as GoP equity in the Discos.
The Power Division, in its summary had proposed a surcharge of 7 paisa per unit but as the summary came under consideration, the ECC was informed that the amount of surcharge be read as 70 paisa per unit instead of 7 paisa per unit. The ECC while posing its confidence on Power Division officials approved a surcharge of 70 paisa per unit.