KARACHI: The estimated cost of power theft during 2017-18 is over Rs53 billion, reveals a report of the Senate Committee on Circular Debt.

The recently released report, authored by Senator Shibli Faraz, disclosed that electricity theft from the national grid stood at 3.9 per cent. Based on an energy supply of 120,400.5GWh, and unit sale price of Rs11.37/kWh, power theft came out to be Rs53.4bn.

High transmission and distribution (T&D) losses, the report said, have contributed Rs187bn over the past five years to the overall circular debt.

It notes that T&D losses of distribution companies (Discos) increased to 18.3pc while the acceptable benchmark level revolves around 10pc in developed countries. The electric supply companies of Peshawar, Quetta, Sukkur and Hyderabad were the worst performers with losses ranging between 22-38pc.

In absolute terms, Pesco lead the charts with a loss of 4,079GWh, followed by Lesco at 2,839GWh and Mepco 2,698GWh. Saving even 1pc of the losses in these companies will have a larger impact compared to smaller Discos.

Meanwhile, the cumulative receivables of Discos soared by Rs154.5bn to Rs824.4bn by the end of FY18.

Of these, receivables from running defaulters and permanent disconnections accounted for Rs500.2bn, while those from the federal government and related entities amounted to Rs244.3bn.

A breakdown of this head shows that there are 5.3 million non-paying electricity connections who are either willful or running defaulters (unable to pay), with their cumulative outstanding balances standing at Rs404.8bn.

“In FY17, the Government of Pakistan raised financing of Rs71bn on Discos’ books for funding circular debt and levied taxes of Rs75bn on these Discos,” the report states.

Moreover, a delay in notification of consumer tariffs by the National Electric Power Regulatory Authority (Nepra) is expected to have affected circular debt by around Rs108bn by 2017-18 end.

As of June 30, circular debt was recorded at Rs1.196 trillion, of which Rs613bn is outstanding towards independent power producers and fuel suppliers.

The report finds serious inconsistencies in finances of the Central Power Purchasing Agency, Discos and Power Holding Pvt Ltd, given that even the principal amounts reported by the companies failed to reconcile with each other.

“There is no consolidated financial model in place that can project financial position, performance and results of the power sector based on key assumptions such as price sensitivities, change in prices of imported fuel, rupee devaluation impact, interest rates etc,” the report stated.

As for future capacity increases, around 20GW of electricity generation projects will be added in the system over the next five years while the power shortfall is expected to last until 2020-21.

The Senate Committee stresses the need for provincial governments to be stakeholders in power sector. “A minimum level of power sharing could be done through involving relevant provincial line ministries in the boards of Discos operating in the jurisdiction of respective governments,” the publication noted.

Other recommendations included introducing a consolidated financial reporting mechanism as well as simplifying the tax structure since it is one of the biggest contributors to circular debt.

Additionally, the report questioned the role of two price regulators — Nepra and Oil and Gas Regulatory Authority — calling for either a merger or improved coordination between the two.

Published in Dawn, October 3rd , 2018