ISLAMABAD, Nov 28: The federal government has decided, in principle, to restructure Wapda’s loans worth Rs100 billion to reduce power rates by 40 paisa to Re1 per unit from the existing average tariff of Rs4.09 per unit.

A formal decision to this effect is expected to be taken by the cabinet next month on the recommendations of the task force on power tariff constituted by the prime minister in May.

Mirza Hamid Hassan, chairman of the task force, told Dawn on Friday that the recommendations would be submitted to the cabinet next week. He said the task force was scheduled to submit its report by Nov 30 but it was delayed due to Eid holidays and also because the task force wanted to take new Wapda chairman on board before submission of its report.

He said the task force had prepared many proposals for tariff reduction, including rescheduling of Rs100 billion debt, decrease in losses, increase in recoveries, cutback in taxes and restructuring of the fuel price.

Mr Hassan, who is also a former secretary of water and power, said the Wapda debt comprised three sets of loans — domestic public loans, foreign re-lent loans and commercial loans. If the government writes off these loans as has happened in the case of the KESC’s loans, the Wapda tariff can come down by Re1 per unit, he argued. However, he said, if these loans were restructured according to prevailing market rates, the tariff could fall by 40-50 paisa per unit.

The task force was set up in May with the assignment of suggesting within two months ways and means to reduce tariff. However, its deadline was extended from time to time up to Nov 30.

The task force is proposing that Wapda should be provided with Rs20 billion over a period of 5 to 7 years for improvement and replacement of old transmission system that can ensure an annual saving of around Rs10 billion.

The task force is also suggesting that the independent power producers should be allowed to import furnace oil directly, a move that can save up to Rs 3 billion a year. This would reduce tariff in the range of 2 to 6 paisa per unit.

The task force has proposed an increase in gas quota by 150 MMCFD (million cubic feet per day) to the existing allocation of 400 MMCFD that will reduce fuel cost by Rs5.529 billion and a relief of 11 paisa per unit to end-consumers.

Another 42 paisa per unit relief could be provided to consumers through rationalization of levies on fuel oil and gas. But the government will have to forgo Rs20.835 billion annually on account of excise duty and development surcharge on gas and ad valorem tax on fuel oil used by Wapda and IPPs.

Wapda is currently running into a deficit of around Rs30 billion. In order to reduce tariff on a sustainable basis, the government will have to ensure timely recovery of public sector receivables.