ISLAMABAD: The government on Friday reduced gas prices for industry by about 33 per cent and settled a Rs78 billion dispute with the Sindh government over outstanding electricity bills against a payment of Rs27.4bn.

These decisions were taken at a meeting of the Economic Coordination Committee (ECC) of the Cabinet presided over by Finance Minister Ishaq Dar that also allowed tax exemptions on procurement of furniture and other supplies in 15 earthquake affected districts and extended time for export of wheat products.

The ECC approved reduction of gas price for all industries from Rs600 per million British thermal unit (mmBtu) to Rs400 per mmBtu to pass on the benefit of reduction in international crude oil prices. The reduced gas rate would also be applicable to fertiliser sector to the extent of its fuel consumption because its gas supply for feedstock is already subsidised under the Fertiliser Policy 2001.

Sindh to pay Rs27.4bn to settle disputed Rs78bn electricity dues

The producer price of natural gas produced domestically is linked to international oil prices under successive petroleum policies but the impact of plunge in international crude prices could not be passed on to the domestic industry as the government enjoyed windfall revenues for almost two years.

The domestic industry in the meanwhile turned uncompetitive on the world markets as export industries of peer economies gained greater share in the global market because of lower costs of doing business. Pakistan’s exports have been on a sliding scale for two years.

POWER BILLS: The meeting also approved a settlement agreement reached between the Ministry of Water and Power and the Government of Sindh to resolve the issue of outstanding bills of public sector consumers in Sindh. The agreement had already been approved by the Sindh Cabinet on September 19 on behalf of the provincial government after the endorsement by board of directors of Hyderabad Electric Supply Company (Hesco) and Sukkur Electric Power Company (Sepco).

This settles an outstanding dispute over unpaid electricity bills by the government consumers of Sindh and the two distribution companies between July 2010 and July 2016. Under the agreement, Sindh would pay Rs27.4bn in six monthly instalments of Rs4.56bn each and partially finance installation of automatic/advance meters within in four months and ensure full recoveries in future.

The Ministry of Water and Power had advocated that it had improved recovery of electricity bills to the extent of 94pc but non-payment of about Rs78bn continued to be a blot on balance sheets of the Discos and future recoveries were also being affected because of a continuous dispute.

Therefore, as a one-time initiative the past bills be settled to pave the way for future recoveries in Sindh. In terms of ratios of outstanding receivables in public and private set of consumers, these two companies were reported to have a higher percentage of outstanding receivables from public sector consumers.

The Council of Common Interests (CCI) ordered in May 2014 to make at source deduction of electricity charges relating to the provincial government departments at the rate of 25pc and reconcile future bills within 60 days. The CCI had decided that next deduction would not take place before reconciliation.

All Discos, except Hesco and Sepco, implemented the decision and have been providing reconciled claims for at source deduction of 25pc of fresh bills by the Ministry of Finance since July 1, 2014.

Sindh, however, disputed the billing and claimed it was being tentatively billed wrongly to cover up electricity theft and other inefficiencies of the power companies and hence at source deductions could not be made after July 2014. A sample examination of about 3,200 connections jointly by the respective parties found 40 per cent wrong billing and only 60pc factual reading and billing.

This proportion was agreed to as basic principle for all public sector connections of the two Discos in Sindh for the period between July 2010 and January 2016 i.e. 67 months. The parties reached an agreement under which Sindh government would make the payment of balance outstanding amount of Rs27.398bn as a full and final settlement including all taxes, surcharges and other levies for the said period. After this settlement, the Discos would not raise any outstanding issues, claims or other liabilities, whatsoever, in relation to the settlement period, including those in relation to arrears of electricity bills, late payment surcharge, previously reconciled bills or write-offs, electricity duty etc.

To avoid future disputes and receivables, an automatic meter reading system (AMR/AMI) would be installed within four months and 50pc of the cost would be borne by the provincial government. The energy department of the province would be given online access to this reading system while the provincial energy department would prescribe maximum consumption limit and intimate to the Disco to disconnect electricity after this consumption was achieved.

On such intimation, the respective Discos shall ensure that electricity supply is discontinued to those connection/meters. Separately, the Discos will also install individual meters in place of bulk supply meters in all housing colonies owned by the provincial government that would also bear the entire cost of these meters.

Besides bearing the cost of meters, the provincial government would also be responsible for payment of all monthly bills as recorded on AMR/AMI system within 60 days of issuance of bill and the delay would attract late payment surcharge.

The provincial government will, however, not be responsible to pay monthly electricity dues against those connections where last paid amount is not reflected in payment history or reading on AMI meter and electricity bill differed. The provincial government will be responsible though for the remaining billing as of now at the rate of Rs513.73 million per month for HESCO and Rs555.82 million per month for Sepco till installation of bills.

The ECC also approved a proposal of the Earthquake Reconstruction and Rehabilitation Authority for exemption of taxes on procurement of furniture and supplies of 15 District Health Units (DHU) and at three colleges located in the 2005 earthquake affected areas in the AJ&K and Khyber Pakhtunkhwa being built under Saudi Development Fund (SDF).

Published in Dawn, November 26th, 2016