ISLAMABAD: The government is expected to issue policy guidelines to the power regulator to increase electricity tariff of Azad Jammu and Kashmir (AJK) by more than 100pc and shift about Rs100 billion fiscal burden of past arrears to the federal budget.

A meeting of the Economic Coordination Committee (ECC) of the Cabinet to be presided over by Finance Minister Asad Umar will take up the matter on Wednesday, besides considering the approval of budget estimates of the National Telecommunication Corporation (NTC) for two fiscal years ie 2017-18 and 2018-19.

A summary moved by the Power Division is seeking the cost of its inability to resolve a lingering matter with the AJK government for more than 15 years worth over Rs100bn to the federal budget. The Mangla Dam Raising Agreement signed by the centre with AJK required a committee to firm up and submit its recommendations regarding the rate of the new electricity tariff for AJK beyond Sept 30, 2003 within the next 45 days.

Those 45 days never materialised and the AJK kept on paying an average rate of Rs2.59 per unit as the applicable tariff of distribution companies kept on increasing to an average of Rs12.93per unit. The AJK had agreed to increase the rate to Rs5.79 per unit but the ministries concerned – Power Division and Kashmir Affairs Division – could not give it a legal cover.

Now, the Power Division requested the ECC to issue policy guidelines to Nepra to apply its determined tariff for Discos to AJK in a manner that the first slab of 100 units of domestic consumers pay at the rate of Rs5.79 per unit with effect from Jan 1 as is applicable to consumers of all Discos.

It has demanded that the difference between bulk supply tariff and 100 unit tariff be provided by finance ministry against tariff differential subsidy as it was also providing to consumers of Disco and this arrangement should remain in place until the next Nepra tariff for 2018-19.

Secondly, the Power Division has also proposed that bulk power supply to AJK should be made on account of Central Power Purchase Agency (CPPA) on the pattern of sale of 650MW to K-Electric instead of three Discos that provide power supply to AJK and the ministry of finance should take over the liability of AJK with sufficient budget provision. This is to remove bad debt from three Discos – Islamabad, Gujranwala and Peshawar– feeding the AJK.

The summary has also sought appropriate provisioning in AJK budget to eliminate any financial build up to AJK’s power bill or the finance ministry should make sufficient subsidy allocation along with a mechanism for clearing the stock of dues that has been piling up since 2011.

Currently, the Department of Electricity (AJK) was getting bulk electricity from Iesco, Gepco and Pesco who are billing normal rates instead of Rs2.59 per unit under the Mangla Raising Agreement of 2003.

The average Disco tariff on the other hand is about Rs12.90 now and the gap used to be picked up by the finance ministry as requirement under the agreement until 2011 when it withdrew the support unilaterally, according to power division.

As of December 2017, the gap since 2011 has developed into Rs91bn including Rs61.5bn on accounts of Iesco, Rs18.5bn on Pesco and Rs11bnon Gepco. Prime minister of AJK had agreed to increase the tariff to Rs5.79 per unit from old rate of Rs2.59 last year but the federal ministries could not actualise it.

The ministries also could not materialise an increase in water use charges to AJK from 42 paisas per unit to Rs1.10 per unit on the pattern of similar rates being paid to Khyber Pakhtunkhwa and Punjab on account of net hydel profit. AJK has Neelum-Jhelum Hydropower project and Mangla Power project on its current portfolio besides a series of upcoming projects.

Published in Dawn, December 12th, 2018