03 November 2004	Wednesday	19 Ramazan 1425

ISLAMABAD, Nov 2: The federal government is expected to finalize on Wednesday a Financial Recovery Plan (FRP) for power sector. The plan, among other things, envisages increases in domestic tariff for commercialization of Wapda's corporate entities.

Minister for Water and Power Liaqat Ali Jatoi will preside over a meeting of the policy committee on power sector reforms. Secretaries of the ministries of petroleum, water and power, privatization, board of investment and commerce besides chairman Wapda and Nepra would also attend, official sources told Dawn.

The meeting would review the implementation status of the corporatization of Wapda and finalization of its FRP.

The milestone which the government has not been able to achieve before the deadline, include creation of a policy and implementation cell at the Ministry of Water and Power, appointment of private sector chief executives of Discos and Gencos, separation of Pepco and Wapda and shifting of Pepco office to Islamabad from Lahore.

All movable assets of Jamshoro Power Company (JPC) and Faisalabad Electric Supply Company (Fesco) have been transferred in their names because the two entities are at the advanced stages of privatization.

In the case of Fesco, out of total 105 immovable assets, 77 have been transferred in the name of Wapda, transfer of another 19 is currently in progress. However, Wapda has issued irrevocable power of attorney in the Fesco's name and the company has taken physical possession and operation control of all the assets.

The assets of the JPC have so far not been transferred due to a dispute over the cost of land with the government of Sindh.

Similarly, the loan liability agreements for 12 corporate companies of Wapda, including Fesco and JPC, have been signed while loan assumption agreements and subsidiary loan assumption agreements have also been signed between Wapda, Fesco and the JPC, and have been transmitted to privatization commission to secure signatures of the lenders and the federal government through Economic affairs division.

The FRP submitted by the World Bank to the government of Pakistan power sector promises zero losses in three years through a combination of tariff increases for domestic consumers, better governance and sizable investment programme.

Unless the plan is implemented through strong commitment, the government would have to meet cash needs of over Rs400 billion for Wapda alone in five years and much more "if KESC privatization fails", and that there would be "more shortages and outages by the year 2007".

The 'business as usual' in Wapda is estimated to cost Rs61 billion in operating losses, Rs67 billion in principal repayment of debt and Rs250 billion to Rs280 billion investment expenditure in five years.

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

The FRP realises that 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 to 5 years.

The bank has offered to provide $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.