December 15, 2002	Sunday	Shawwal 10, 1423

ISLAMABAD, Dec 14: The World Bank has estimated that Wapda’s cash shortfall will be close to Rs30 billion during 2002-03, to be eventually borne by the federal budget in the form of deferred debt service payments.

Official sources said here on Saturday the World Bank had expressed its concern over the Wapda’s financial performance, which it said, had been shaky over the past years but sharply deteriorated in 2001-02.

The bank said Rs30 billion cash shortfall was about 0.8 per cent of the GDP.

The government was also being expected to effectively implement three years Financial Improvement Plan (PIF) 2002-04.

According to the World Bank, Wapda’s poor financial performance is attributable to the weak bill collection, including from the public sector, high levels of transmission and distribution losses (about 25 per cent of units generated or purchased) due to left and leakages, inadequate tariff adjustments which did not reflect increased fuel prices in 1999- 2000. And increasing purchases from independent power producers (IPPs), including payments for large unused generation capacity and the decline in the share of cheaper hydro power generation, as result of drought, have also contributed to the poor financial performance of the organization.

The bank is of the view that strong implementation on three years PIF could restore Wapda’s financial viability by fully and timely implementation of the fuel adjustment clause and by limiting progression of Wapda’s administrative expenses.

Similarly, a reduction in technical and non-technical losses by 1.5 percentage point each year should be achieved and at the same time improvements in billing and collection should be ensured so as to collect the amount of receivables from all consumers, including government entities. The situation could improve, provided major Ghazi Brotha hydro project comes on line in 2003-04. The government would also settle KESC’s arrears to Wapda and make sure that all other public sector dues be cleared during the current financial year.

Over the past decades, the governments has tried to reform Wapda to increase its efficiency through competition, accountability, managerial autonomy and market incentives.

The reform process gained momentum from 1998 on with (a) a financial restructuring entailing tariff increases in 1998-99 and a large debt-for-equity conversion of Wapda’s debt serviced liabilities to the government; (b) the appointment of new management team, entrusted with the responsibility of improving governance and efficiency; (c) the launching of a corporatization process, with the unbundling of Wapda in one transmission, eight distribution, and three generation companies; and (d) an improved regulatory framework, within particular the adoption of a formula based tariff adjustments for fuel costs. These measures, the World Bank believes, were however, implemented rather slowly and sometimes not consistently.