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| October 13, 2003 | Monday | Sha'aban 16, 1424 |
Task force asks govt to cut interest rates: Loans to Wapda
ISLAMABAD, Oct 12: A task force on power tariff reduction has suggested the government to reduce interest on both re-lent and new loans worth nearly Rs100 billion to Wapda which could result in significant tariff cut to power consumer.
The task force, led by former federal secretary Mirza Hamid Hasan, was constituted by Prime Minister Zafarullah KHan Jamali in May last to submit a report within two months suggesting ways and means to reduce power tariff.
The task force’s deadline was further extended to Oct 15, but has sought another 15 days to complete the report, officials associated with the task force told Dawn on Sunday.
The sources said the task force was given a detailed briefing on Saturday by the national control centre (NCC) over the criteria and mechanism of purchase of power from the independent power producers (IPPs) and its dispatch, and noted that a sizable reduction could also be achieved if modern techniques were employed.
The task force is also proposing that Wapda should be provided Rs20 billion for improvement and replacement of old transmission system that could provide an annual saving of around Rs10 billion to Wapda system.
The sources said up to 25 paisa per unit cost could be further reduced in case the interest rate on re-lent and new loans ranging from 17 per cent and 18.4 per cent, respectively, was brought down to the single digit in line with prevailing rates in the market.
The task force has asked the finance ministry to carry out an exercise in consultation with Wapda authorities to ascertain exact amount of loans to Wapda and their repayment cost to make it part of the report to be finalized by end of current month.
FURNACE OIL IMPORT: Wapda has suggested to allow independent power producers (IPPs) to import furnace oil directly that would save approximately Rs1 to 3 billion a year. This would reduce tariff in the range of two to six paisa per unit.
It said Wapda saved Rs700 million during 2002-3 for its thermal units through direct oil import, which was earlier a part of oil companies’ profit. The IPPs oil consumption is estimated at 2.165 million tons during 2003-4.
GAS QUOTA INCREASE: The paper proposed increase in gas quota by 150 MMCFD (million cubic feet per day) to the existing allocation of 400 MMCFD that would reduce fuel cost by Rs5.529 billion and a relief of 11 paisa per unit to end-consumers.
RATIONALISATION OF LEVIES: Another 42 paisa per unit relief could be provided to the consumers through rationalisation of levies on fuel oil and gas. But the government will have to forego Rs20.835 billion annually on account of excise duty and development surcharge on gas and advalorem tax on fuel oil used by Wapda and the IPPs.
It said the economic logic of taxing inputs for an essential items and thereby penalising the consumers for their dependence is not socially sustainable.
REMOVAL OF TAXES: Wapda said that government taxes charged to end consumers amounted to 71 paisa per unit, of which 30 paisa per unit was mitigated by the government through a subsidy. The removal of sales tax, withholding tax and electricity duty could therefore bring down the tariff further by 41 paisa per unit.
CAP ON WAPDA’S O&M COST: Wapda’s total revenue requirement could be frozen at the current level saving an increase of Rs1 billion. The cost escalation on account of inflation would be met by Wapda through efficiencies.
CURRENT DEFICIT: Wapda is currently running into a financial deficit of around Rs30 billion. In order to reduce tariff at a sustainable basis, the government should ensure timely recovery of public sector receivables.
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