ISLAMABAD: The Economic Coordination Committee (ECC) of the Cabinet on Friday directed the power regulator to build over Rs55 billion additional cost of system and managerial inefficiencies into the consumer tariff and allowed 1.2 million tonnes of wheat export at Rs6 billion public expense.

While taking these decisions having impact on public life, Finance Minister Ishaq Dar who presided over the ECC meeting also expressed deep sense of shock and grief over the sad demise of King Abdullah.An official statement said the “ECC approved issuance of policy directive to National Electric Power Regulatory Authority (Nepra) to build in costs incurred by the power sector into the tariff without affecting the end consumer”.

Take a look: Power consumers to pay Rs117bn more due to govt’s mismanagement

When contacted, a senior government official told Dawn that the decision to issue policy guidelines to Nepra was to block re-emergence of circular debt again and again which was considered by many as the major factor behind recent petrol crisis.

He explained that Nepra had been asked to determine separate tariff for Azad Kashmir in the light of the Mangla Dam Agreement under which the government of Pakistan was required to provide electricity to AJK at a lower rate as a compensation for dislocation of millions of residents and their properties for increasing the water storage capacity.

He said Nepra determined tariff for AJK as part of national tariff which the distribution companies could not recover due to Mangla Dam Agreement and resulted in contribution of Rs14 billion annually to the circular debt.

Secondly, Nepra had reduced system losses for distribution companies from 16 to 13pc as part of consumer tariff setting which caused Rs20bn loss to the power companies. The power ministry believed it was too stringent a condition for distribution companies which should be eased.

ECC allows export of 1.2m tonnes wheat with Rs6bn subsidy

Thirdly, the policy directive would also like Nepra to allow the cost of debt servicing, estimated to be in excess of Rs27bn every year, to be built into the consumer tariff because there was no way distribution companies could finance loans and terms and finance certificates against settlement of circular debt.

The official said the ECC desired Nepra to allow this financing through consumer tariff as the government could provide subsidy only for consumers using less than 200 units per month under the IMF agreement.

WHEAT EXPORT: The ECC approved export of 1.2 million tonnes of wheat out of the surplus stocks available in Punjab and Sindh. It was reported that about 2.5 million tonnes of wheat was surplus.

It decided to provide, out of federal exchequer, $55 per tonne subsidy for export of 800,000 tonnes of wheat from Punjab and $45 per tonne on 400,000 tonnes from Sindh. The difference between the two provinces was due to transportation cost from the port.

It was informed that over 100pc increase in wheat support price from Rs600 to Rs1,300 per 40 kg in a few years had encouraged farmers to deliver bumper crops, resulting in surplus stocks, but its domestic price was quite lower than international market. This had resulted in glut and feared damaging the produce.

The ECC also issued directives for immediate ban on import of wheat by-products that were competing out local industries and domestic wheat byproducts.

The ECC also approved a proposal of the Ministry of States and Frontier Regions (Safron) for provision of 30,000 tonnes of wheat to the United Nations World Food Programme for distribution among Temporarily Displaced Persons (TDPs) of Fata and Khyber Pakhtunkhwa, catering for the period up to March 31, 2015. The ECC also observed that in case of further requirements, Safron could revert to the ECC with a fresh proposal.

ATTRACTING INVESTMENT: The ECC also approved a summary of the water and power ministry on policy to attract private sector investment in transmission line projects with the inclusion of upfront tariff as an option. Nepra is empowered to grant licence authorising the licensee to engage in the construction, ownership, maintenance and operation or specified transmission facilities on specified terms and conditions in the public interest.

The committee also approved for the extension of gas sales agreement between OGDCL and Fauji Kabirwala Power Company Limited (FKPCL) for provision of 20mmcfd of gas at the earliest possible, but not later than February 1, 2015 till the time LNG was made available to the company for power generation. At its maximum generation capacity utilisation the plant will generate157MW of electricity.

It also approved the re-lending of the buyer credit loan to Pakistan Atomic Energy Commission (PAEC) as per actual terms and conditions available to the Government of Pakistan. Based on the above approval, the revised rate comes to 9 per cent comprising actual cost of loan and exchange rate risk.

Published in Dawn January 24th , 2015

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