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| December 15, 2003 | Monday | Shawwal 20, 1424 |
Wapda pricing system termed unjust
ISLAMABAD, Dec 14: Deregulated electricity tariffs for the consumers on the one hand and regulated prices paid to the Independent Power Projects (IPPs) on the other render the pricing system in Pakistan highly unjust, irrational and exploitative.
This transpired during a discussion at the three-day Sustainable Development Conference of SDPI that concluded here on Saturday.
In their scientific paper, Prof A.H. Nayyar and Fahd Ali from SDPI, observed that Wapda determined its price not to recover its cost but to bridge the gap in its balance of payments. Thus the petitions filed by the Authority with the NEPRA for tariff enhancement cited its need to meet its shortfalls accruing from management, debt obligations and distribution losses.
Since WAPDA’s tariff determination was not based on the cost of services, it always gave a distorted picture of the costs. The distortion in the prices also arises due to existence of cross-subsidies among various sectors - e.g. commercial rates are nigher than the domestic, industrial and agricultural rates.
A Wapda representative, Mohammad Shabbir, Director of Finance, WPPO, justified the high tariffs on the plea of payments, which the Authority had to make to the IPPs under the terms which make a joke of the principles of free trade and liberal markets, flaunted by the international prophets of these concepts - the World Bank and IMF.
But Prof Nayyar and Fahd observed that the Wapda had consistently foiled attempts by the public interest groups to find out the true costs of services. This and the refusal by the PPIB (Private Power Infrastructure Board) to share the tariff formula used to determine the tariff rate for IPPS with these groups “ make the WAPDA’s tariff system unclear, if not suspect”.
The authors then calculated the cost of energy produced by a 300 megawatt thermal power plant based on the costliest fuel, that is, furnace oil (although some plants are based on gas) and assuming zero tax rate (because the IPPS enjoy exemption from all taxes).
The result using these values yielded cost of generation equal to 4.35 cents per unit and a tariff rate equal to 5.22 cents.
What the situation, however, is WAPDA adamantly refuses to say even as it tries to raise its tariffs every now and then, while its own efficiency dwindles with huge transmission/distribution losses and a loss of Rs40 billion.
The authors went on to criticise the latest power policy announced by the PPIB last year which places reliance on the IPPs to meet the rising demand. Judging by past experiences, it was safe to assume that the result would still be higher tariffs.
The situation, they opined, could be improved through a dialogue between all concerned - WAPDA, PPIB, NEPRA, Government of Pakistan, experts and the general public - so that just, fair and equitable power policies were devised.
Girish Sant from India too presented a dismal picture concerning his country where the power sector was based on four pillars for over five decades, namely, budgetary support by government, self-reliance for fuel and technology, centralised supply with grid expansion and cross-subsidy to ensure affordability.
The new system, introduced to fulfil World Bank conditionalities, is resulting in newer form of segmentation of the society.
FOOD SECURITY: The vagaries of WB/IMF-sponsored structural adjustment programmes (SAPS) and liberalisation also came under focus in a session on food security.
Dr Abid Qayyum Suleri of SDPI and Sahib Haq of World Food Programme presented the features of a food security atlas being devised for Pakistan and Azad Jammu and Kashmir, respectively.
Ms. Subhashini Ali from All India Democratic Women’s Association (AIDWA) related the disastrous effects of SAPS begun in her country in 1991. One of the dramatic victims of this policy was the Public Distribution System. Increasingly, therefore, hunger and starvation stalk the country even with 4 crore tons of foodgrains in government gowdowns.
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