ISLAMABAD: The Economic Coordination Committee (ECC) of the Cabinet on Thursday asked the Power Division to seek a review from power regulator for a streak of quarterly tariff adjustments for K-Electric involving Rs101 billion burden on budget and approved tenders for import of 550,000 tonnes of wheat and 100,000 tonnes of urea.

The meeting presided over by Finance and Revenue Minister Shaukat Tarin also extended for a month the Prime Minister’s Relief Package-2020 for provision of five essential items on subsidised rates that expired on Sept 30. “The ECC granted extension for one-month with a direction to present a detailed summary before ECC, keeping in view, international price hike in essential food commodities,” a statement said.

The ECC also approved a summary of the Ministry of National Food Security for award of fifth international wheat tender to import 550,000 tonnes (after matching process) of wheat for the FY22. It also approved a tender for import of 100,000 tonnes of urea for building strategic reserves of the fertiliser during the Rabi season FY22.

On a summary moved by the Power Division regarding quarterly tariff adjustments of K-Electric, the ECC decided that the Power Division may approach National Electric Power Regulatory Authority (Nepra) to review its earlier decision on the issue and present an updated summary before ECC for consideration. The Power Division had proposed to adjust pending tariff claims of KE worth Rs101bn against its payables towards Power Division’s Central Power Purchasing Agency (CPPA).

Refers K-Electric’s QTAs to regulator for review

One tariff determined by Nepra was duly notified by the federal government on May 22, 2019. Also, quarterly tariff adjustments determined by Nepra on Dec 31, 2019 of 11 quarters, on the basis of last quarter April-June 2019, tariff was notified on Oct 12, 2020 to maintain uniform tariff. It was reported that in the matter of Discos the difference between actual cost of supplying power and reference rates was passed on to consumers prospectively through fuel cost adjustment (FCA) and QTAs (quarterly tariff adjustments) mechanism.

However, in case of KE the reference rates (fuel and capacity) are rebased on quarterly basis through mechanisms for adjustments as provided in 2018 multi-year tariff and accordingly the difference in actual and reference rates relates for previous period cannot be charged to consumers prospectively and hence to be paid through GoP subsidy.

Power Division tabled another summary regarding levy of sales tax on subsidy granted by federal government to Discos. After seeking input from all concerned, the ECC decided that the matter may be referred to the Law Division for seeking opinion and legal interpretation may be presented before the committee for further deliberations.

The issue pertained to sales tax claimed by FBR on subsidy paid by the government to the consumers on socioecoomic considerations and such claims had gone beyond Rs100bn. The power companies claimed that GST on subsidy for recovery form consumers was illegal because the subsidy was provided by the government and federal government could not be taxed. Also, a socioeconomic obligation could be taxes and a resulted recovery of uncharged tax from Discos would result in increase in circular debt.

The ECC approved summary by the Power Division regarding approval of payment mechanism for TNB Liberty Power Ltd. The ECC approved the proposal as part of settlement with other relevant IPPs.

Published in Dawn, October 1st, 2021