Wasa seeks Rs2 billion bailout package

Published December 12, 2020
Financial crunch has forced the Water and Sanitation Agency (Wasa) to seek Rs2 billion bailout package from the Punjab government with immediate effect to deal with various operational and administrative affairs. — File photo
Financial crunch has forced the Water and Sanitation Agency (Wasa) to seek Rs2 billion bailout package from the Punjab government with immediate effect to deal with various operational and administrative affairs. — File photo

LAHORE: Financial crunch has forced the Water and Sanitation Agency (Wasa) to seek Rs2 billion bailout package from the Punjab government with immediate effect to deal with various operational and administrative affairs.

A summary has been moved to Chief Minister Usman Buzdar through the secretaries (housing and finance departments) and the chief secretary, Dawn has learnt.

“Wasa (Lahore) has put its utmost efforts to enhance its financial resources. But, due to the indispensable factors, it is in dire need of government assistance in the shape of a bailout package amounting to Rs2,000 million (Rs2 billion) to run the affairs of its business as well as to dispose of liabilities,” says the summary which had been moved a couple of days ago.

Wasa (Lahore) is the second-largest water utility of Pakistan that has been serving a population of more than eight million people. Its operating area is more than 350 Sq-km and major responsibilities include provision of potable water and sewerage facilities to its consumers as well as drainage facilities to the whole city. It has the only source of underground water extracted by almost 600 tubewells within the area of jurisdiction. Similarly, it has to operate with more than 120 disposable stations to dispose of sewage of the city.

According to the summary, Wasa is facing acute financial crisis these days. Wasa’s approved current financial year (2020-21) budget deficit is over Rs5.504 billion. And to compensate the deficit, the government of Punjab has been providing a subsidy to the tune of Rs 2.2 billion (2,200 million) per annum. Thus, the net budget deficit for the current financial year 2020-21 is over Rs2.879 billion as approved by the LDA’s governing body.

The summary also points out main reasons behind such a huge deficit, stating that it is mainly due to non-revision of domestic tariff which is kept frozen since 2004, whereas the agency’s expenditure has increased manifold due to concurrent increase in rates of electricity, POL (petrol, oil & lubricants), pension, staff salaries etc. Unfortunately, the subsidy (Rs2.2 billion) provided by the Punjab government to Wasa in lieu of frozen tariff also stands frozen at the same level since 2012. And it does not take into account the recession and increase in the agency expenditure since 2012.

Another reason is the fact that the National Electric Power Regulatory Authority (Nepra) keeps changing its tariff categories/ slabs for Wasa. In 2004, the electricity charges were Rs4.75 per unit (i.e. scrap/ agricultural tariff). This rate kept increasing gradually over the years besides changing industrial tariff, whereas from July 2018 the tariff category for the agency was suddenly changed to “A-3” (General Service Tariff) at the rate of Rs17.56 per unit. However, this tariff currently costs Rs26.46 per unit to Wasa.

“Owing to such tariff changes by Lesco, the expenditure of Wasa on account of electricity has increased by 577pc compared to 2004 while its own tariff remained frozen since 2012,” the agency argues in the summary.

It also mentions the coronavirus outbreak in the country and subsequent lockdown imposed by the Punjab government in Lahore. This led to collapse of the revenue collection during the last quarter of the financial year, 2019-20, resulting in shortfall in collection by 15pc.

Meanwhile, the government announced property tax waiver to provide relief to the people during Covid-19. Thus, Wasa suffered another revenue loss of Rs343 million during FY 2019-20 whereas not a single penny has been received during current financial year 2020-21 against UIP (Urban Immovable Property) tax share.

Besides various challenges, Wasa says that it put its maximum efforts to increase the recovery and enhance its financial resources. “The efforts did pay off and despite remaining under the same tariff and human resources, the average revenue collection significantly increased during last few years (i.e. from Rs2.928 billion to Rs5.544 billion per annum),” the summary claims. By the end of 2019-20, it mentions that the accumulated liability of Wasa was Rs1.092 billion (i.e. Rs800 million for Lesco & Rs292 million for contractors). The liability could not be discharged due to paucity of funds whereas, till the end of current financial year, it has been envisaged to the tune of Rs2 billion.

Moreover, the liability against electricity bills alone has increased to an unbearable situation as non-payment of bills has led to disconnection of electricity connections at Wasa installations.

“In view of the foregoing facts and situation, the chief minister of Punjab is requested to approve a bailout package amounting to Rs2 billion as grant in aid through supplementary grant on urgent basis for clearing the liabilities and to ensure continuity of essential water supply sewerage services to the citizen of Lahore till end of June 2021,” says the summary.

Published in Dawn, December 12th, 2020

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