ISLAMABAD, Feb 16: The Water and Power Development Authority (Wapda) has told the federal government that an immediate increase of 40 paisa per unit electricity tariff was inevitable unless it was given Rs17 billion through non-tariff sources.

A senior government official told Dawn Wapda asked the government to provide that amount to avoid increase in consumer tariff to meet additional burden of fuel price increases.

The demand was made by Wapda Chairman Lt-Gen Zulfiqar Ali Khan (retired) at a meeting presided over by prime minister’s adviser on finance Shaukat Aziz on Saturday. The meeting was also attended by the secretaries of finance and water and power.

The official said the Wapda chairman presented a strong case on the ground that the federal government generated Rs60 to Rs70 billion per annum through various taxes, including 15 per cent GST on electricity sales, that automatically increased due to rise in furnace oil prices.

The Wapda chief was of the view that while the federal government earned windfall benefit due to increase in oil prices the utility would lose proportionately due to additional burden coupled with low hydel power generation and expected drop in consumption level.

He believed that the government should share the windfall benefit with the utility to avoid increase in consumer tariff.

The official said the Wapda chief informed the meeting that the utility was facing serious financial difficulties due to repeated increases in the prices of furnace oil.

The Wapda chief pleaded that since the new political government was not in favour of increase in electricity price as required to offset the additional burden, the federal government should make arrangements to take responsibility of the financial gap.

He told the meeting that furnace oil was available at Rs10,371 per ton in December 2002 that has increased to over Rs15,000 per ton at present, showing an increase of over 50 per cent.

Shaukat Aziz assured the Wapda chief to give a considerate look to the difficulties of Wapda and to see how the federal government could help bridge the financing gap, the official said.

The furnace oil is a pass through item in the Wapda tariff which is revised quarterly by National Electric Power Regulatory Authority (Nepra) on the basis of international prices.

Nepra had reduced Wapda tariff by 12 to 19 paisa per unit in December as a result of reduction in international oil prices although the prime minister had announced 12 paisa per unit reduction.

Wapda has to file a petition before Nepra in the first week of March to revise the tariff under the automatic fuel-based tariff mechanism.

The Nepra determination had taken furnace oil at Rs11,406 per ton on Oct 2, 2002, to Rs10,437 per ton on Dec 16, 2002. Since Dec 16, 2002, the furnace oil rate has increased by around Rs5,000 per ton and is expected to go up further for another time before the quarterly review due on March 16.

A Rs1,000 per ton increase in furnace oil price has a revenue impact of Rs3.5 billion on Wapda over a period of three months and required an average 15 paisa per unit increase in consumer tariff.

This means that around Rs5,000 per ton would result in Rs17 billion revenue impact and require around 40 paisa per unit increase in tariff.