11 October 2004	Monday	25 Shaban 1425

ISLAMABAD, Oct 10: The World Bank has finalized a financial recovery plan (FRP) for Pakistan's loss-ridden power sector that promises zero losses in three years through a combination of tariff increases for domestic consumers , better governance and sizable investment programme.

A high-level seven-member delegation of the bank led by Senior economist Ian Alexander and head of energy and infrastructure unit Penelope Brook is currently in Pakistan discussing technical, financial and legal details of the plan.

The World Bank says the government would have to meet cash needs of over Rs400 billion for Wapda alone in five years and much more "if KESC's privatisation fails" and that there would be "more shortages and outages by 2007".

The power sector which should be a growth driver is instead choking growth through high operating losses of 1.4 per cent of GDP (which is equivalent to 75 per cent of education and 200 per cent of annual health budget), high perceived corruption, high industrial tariff and low reliability.

The 'business as usual' in Wapda is estimated to cost Rs61 billion in operating losses, Rs67 billion in principal repayment of debt and Rs250-280 billion investment expenditure in five years.

The five-point recovery plan envisages cost reductions, better governance, planning and financing investments, and more importantly rationalizing tariffs by increasing domestic tariffs and targeting the slab of first 150 units which get higher subsidy.

According to the World Bank, the inescapable reality for the survival of the power sector is that tariffs should cover the costs and the government should present a clear-cut strategy for adjusting and realigning tariffs and targeting subsidies in pace with service improvements in 3-5 years.

The bank has offered $500 million investment for turning around the sector in five years and to provide capacity building support to key agencies and utilities to kick-start loss reduction.

It has also proposed an additional gas availability of 150 mmcfd (million cubic feet per day) for power generation to save Rs5 billion per annum, collection of Rs30 billion uncollected bills and technical loss reduction which could ultimately bring down losses to zero and a saving of around Rs50 billion.