K-Electric Fails To Improve Pakistan’s Power Production: NEPRA
The only means of progress were technology and competition. The technology is already available, but there is no competition, chairman NEPRA stated.
Touseef Hassan Farooqi, chairman of the National Electric Power Regulatory Authority (NEPRA), stated on Saturday that K-Electric, as a private company, performed better than other DISCOs because it drastically reduced Transmission and Distribution (T&D) losses from more than 40 percent to 15.5 percent. However, the biggest problem was that K-Electric failed to improve the power production in Pakistan.
“The only means of progress were technology and competition. The technology is already available, but there is no competition. Due to KE’s exclusivity ending in July 2023 and the CTBCM of Pakistan allowing Karachi’s businessmen to choose how to meet their electricity needs, including building their own power production plants , purchasing electricity from third parties, or acquiring from any other power producer,” he added while exchanging views at a meeting during his visit to the Karachi Chamber of Commerce & Industry (KCCI).
KCCI Managing Committee Members: President KCCI Mohammed Tariq Yousuf, Senior Vice President Touseef Ahmed, Vice President Mohammad Haris Agar, Former President Muhammad Idrees, and Vice Chairman Businessmen Group Jawed Bilwani all attended the meeting.
According to Chairman NEPRA, the Competitive Trading Bilateral Contract Market (CTBCM) offers a roadmap for opening Pakistan’s wholesale electricity market. Its goal is to give large power consumers the option to buy electricity from DISCOs or another competitive supplier of their choosing.
According to him, it has been one of his top priorities over the past three years and five months to make sure that no project based on imported fuel or take-or-pay was approved; as a result, neither new licences nor tariffs were issued for projects based on imported fuel. He continued, “I am making every effort to bring about the green revolution in Pakistan, which is very important for our nation as the entire world now seriously considers how green you are.”
He pointed out that the industrial support package, which gave large-scale manufacturing a 25% discount and small and medium businesses a 50% discount compared to their prior consumption, produced positive results. This accelerated industrial activities and helped in achieving an impressive growth rate of 5.8 percent in the first year and 6 percent growth in the second year.
According to him, Pakistan’s power situation was at its worst because, despite having installed production capacity, the nation was unable to generate electricity because there was no money to pay for the importation of fuel needed to generate electricity.
He believed that since 65 percent of the country’s electricity was produced from imported fuel, the overall impact on the electricity tariff should have been 16 times higher. However, neither NEPRA nor the international markets have increased the tariff by at least eight times overall, not even by four times, which is something that should be commended.
In response to concerns raised about retrospective liabilities, he explained that because the majority of the fuel used to generate electricity is imported, invoices typically reach NEPRA through CGPA after a delay of two months, leaving no other option but to charge back. However, he promised that efforts would be made to speed up the process and shorten the delay to one month.
In response to a question about fixed charges levied by KE on closed industries, Chairman NEPRA stated that all such closed industries have the option to apply for disconnection, which would exempt them from fixed charges under the applicable rules. Upon receiving a request from this industry, KE is obligated to reconnect them at any time without requesting a security deposit or system development fees.
Referring to the mission statement of NEPRA, Chairman BMG Zubair Motiwala stressed that NEPRA must make electric power affordable for industries to the point where they can compete with those in their region because the current electricity tariff is astronomically high in comparison to that of countries like India, Bangladesh, Sri Lanka, Vietnam, and Cambodia.
“In the energy sector, Bangladesh’s electricity tariff was 22% lower than Pakistan’s, and their gas prices are 30–32% lower.” “Because of this, we are unable to compete and grow our exports,” he said, adding that Pakistan’s exports would not be less than US$60 billion if energy tariffs were brought into line with Bangladesh’s.
Industrial electricity tariff should be calculated according to the industries’ line losses and pilferages, Zubair Motiwala has said. He also pointed out that a new trend has emerged wherein a retrospective liability is created and collected from current occupier consumer which was unconstitutional as Pakistan’s constitution does not allow retrospective levies, punishments or collections.
According to Chairman BMG, Pakistan currently has a power production capacity of about 23,000 megawatts, and 1300 more megawatts from Thar will be added to the system shortly. Additionally, the amount of electricity produced from solar, wind, and hydroelectric resources has also been rising quickly.
“In this case, charging a peak-hour tariff was extremely unfair. In light of the country’s severe gas shortages, if I had been in charge of making policy, I would have preferred to reduce electricity rates by 50% for consumers who stop using gas and switch to electricity for carrying out their production activities. We already pay capacity fees for unused electricity, which must be provided at a 50% discount to industries in order to entice them to switch from gas to electricity.”
According to him, the government has a policy that gives industries across the nation—with the exception of those located in KE territory—a 50% price reduction for units that use more electricity than they did the previous year.
Prior to that, Tariq Yousuf, President of KCCI, welcomed NEPRA Chairman and noted that the circular debt had risen alarmingly to more than Rs 4000 billion.Circular debt has been primarily caused by high transmission and distribution losses, recovery issues, underutilization of assets, running defaulters, and delays in payment of subsidies.
“This massive circular debt is harmful to the industrial sector and the country’s economic growth. Corrective action must be taken, and the distribution system must be enhanced. Our priority should be to effectively deal with higher T&D losses, and efforts have to be made to bring them down at least to the level of given targets,” he added.