May 4, 2005	Wednesday	Rabi-ul-Awwal 24, 1426

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LAHORE, May 3: Facing serious financial problems, the Water and Power Development Authority has requested the federal government to provide it a subsidy of Rs26 billion for the year 2004-05. According to sources in the Ministry of Finance, the request has reportedly been approved and money may soon be released to enable the authority to meet the revenue shortfall.

The authority, on an average, has been getting Rs20 billion subsidy for the past four years, which has now increased to Rs26 billion.

Speaking on the floor of the National Assembly recently, the minister of state for water and power had stated that the authority had received Rs80 billion over the past fours years. According to sources in the ministry of water and power, Wapda has sought the subsidy directly from the finance ministry, bypassing the ministry concerned.

According to the letters written by Wapda to the finance ministry, Wapda estimated its income at Rs221 billion and expenditures at Rs246 billion, leaving it with a shortfall of Rs25 billion. Now the authority wanted the government to bridge this gap with taxpayers’ money, the sources said.

The World Bank is reported to have conveyed its dissatisfaction with the present management of Wapda. During the recent meeting of the Pakistan Development Forum in Islamabad, the bank conveyed to Prime Minister Shaukat Aziz that the ‘Wapda culture’ had taken over the present management.

The bank maintained that all efforts of the present management were aimed at “maintaining the status quo rather than ensuring an energetic thrust for institutional reforms”, the sources claimed. This situation could not, and should not, be allowed to continue, the bank is reported to have told Mr Aziz.

Commenting on the situation, a former member (finance) of Wapda said the difference between prudent cost-management and actual performance of Wapda had dogged the authority. The National Electric Power Regulatory Authority (Nepra) has its own set of performance parameters for Wapda. It allows tariff based on these criteria. Wapda failed every year to achieve targets and instead asked the government to meet the difference, he said.

He said Nepra was of the opinion that Wapda tariff should be based on a certain level of efficiency at all levels — generation, transmission and distribution. It has to reduce losses on all three counts. The regulatory authority sets targets for all three subjects and asks Wapda to meet them. Nepra, along with the federal government, maintains that the cost of Wapda’s inefficiency cannot be passed on to consumers.

Another former member (power) of Wapda argues that even bill collection has declined and arrears of the authority went up to Rs83.146 billion in February this year. This represents an increase of Rs14 billion over the last eight months.

Wapda’s transmission losses also went up by 0.5 per cent — from 7.2 per cent last year to 7.7 per cent this February. The cumulative cost of all these failings hurt Wapda and the nation at the end of every year, he said.

With an income of Rs221 billion, the deficit of Rs26 billion is only 10 per cent. If the authority was able to bring its losses down by even two per cent, it could improve its financial health, but unfortunately this had not been the case, he remarked.

The government and Nepra must realize that Wapda has been unable, or unwilling, to overcome its inefficiencies for the last many years, says an official of the Pakistan Electric Power Company (Pepco). Both did not allow inclusion of its cost of inefficiency in tariff, but wanted the same to be met with tax payers’ money every year.