WAPDA, slapping surcharge after surcharge, has opted for the easy way out to meet its financial needs without an overall reduction in line losses, recovery of arrears and technical improvement. The National Electric Power Regulatory Authority (Nepra), after initial resistance, generally approves applications for increases in tariff.

This callous process, which puts unjustified costs on to consumers, has been going on for the last many years. Dependence on costly oil-and-gas-based thermal energy has put a back- breaking burden on the people, besides rendering our products uncompetitive and worsening the alarming unemployment situation stemming from the closure of industrial units due to uneconomical power and downturn in investment.

Earlier, on the President’s instruction, the power tariff for the domestic consumers was reduced from 37 paisa to 19 paisa a unit. However, the Nepra decision of July 19 for increasing power tariff for categories like agriculture and industrial consumers and Azad Kashmir remained unaffected.

Latest reports suggest that Wapda has, without prior notice, increased the domestic consumer tariff by 56 paisa with effect from September 14 against the 27 paisa increase allowed by Nepra.It increased the power tariff for commercial, industrial and bulk consumers by an additional 10 to 20 paisa per unit in a readjustment of figures to shift the burden from domestic consumers.

The cruel pattern of recurrent tariff increase also affects charges like additional surcharge, electricity duty, fuel adjustment charge and GST, increasing the cost of living. The 40 paisa increase in tariff made in July last, according to a study, would have a devastating impact on many sectors like steel and plastics. Every sector of the industry from textile to cottage would be struggling for survival.

Wapda’s plea invariably is that it cannot cope with its ballooning losses and hike in oil price without increase in tariff. It also attributed its heavy losses to the high cost of electricity being purchased from independent power producers. But it was able to save $6037.702 million after getting the capacity payments of different IPPs reduced. Wapda, moreover, had been making profit until 1999-2000. The increases in oil and gas cost have still had their effect, but the mounting losses over the last three years have apparently been due to a more deep-rooted problem than was generally believed. Figures compiled by the Institute of Electrical Engineers show that there has been a phenomenal increase in Wapda’s expenditure which rose by 127 per cent in four years—from Rs85.6 billion to Rs194.3 billion. The much- trumpeted fuel bill had risen by only Rs16.5 billion—from Rs19.5 to Rs36 billion in four years compared to Wapda’s deficit of Rs55 billion. The average rise in revenue collection has been only 24 per cent despite a tariff increase of 16 per cent and a similar rise in load growth. Although the authority argues that it had to raise the prices due to the transfer of power generation to thermal, instead of hydro power, its report for 2000-01 belies this theory. It shows under-utilization of installed generation capacity and thermal generating units. Since its own thermal plants were not being operated, it was forced to buy 8.765 billion units from the IPPs, costing over 42 billion during the current year alone. What else can account for this phenomenon except inefficiency and mismanagement?

There are recurrent reports of leakages and waste, not to speak of massive theft. Its line losses are still among the highest in the Third World. Consumers Power of Michigan, and Public Service of New Hampshire completed plants that may never operate due to technical and financial problems. The value of these plants approaches or exceeds the worth of all of its other assets, and could threaten company survival. It shows that providing reliable and economical power is often hampered by general inefficiency of electricity distribution, which also characterized Wapda.

In many developing countries, 15 per cent of the power generated is lost, about twice the normal rate in developed states. The loss in the case of Pakistan is up to 23 per cent or more. Outages, trippings and breakdowns occur on a regular basis on the overstretched and inadequately maintained system and often hamper industrial production. The hapless consumer has had to pay for all this through spiralling rates and inflated bills.

As regards the financial aspect, the projected payment to IPPs for the 2001-2002 was Rs113.8 billion (Rs78 billion higher than the previous year). Receivables from the public sector were at the level of Rs26.613billion as in February 2002 while receivables against the KESC had gone up to Rs 11,190 billion in February 2002. During 2001-2002, receivables rose from Rs 43.885 billion to Rs51.148 billion. With such massive arrears, heavy cost of private power and neglect of the critical task of technical improvement, how can a commercial organization remain solvent? On the one hand, the cost of imported energy was very high and on the other the government was using electricity as a revenue source to bridge its deficit, collecting around 23 per cent from this source. Despite heavy mismanagement and corruption, Wapda was a profitable organization until the IPPs came along to expose its inherent weaknesses. Matters have been made worse by the government’s inability to adopt a firm stand on recovery of arrears and clearance of outstanding dues from federal government and related agencies, provincial governments, FATA, agricultural tube-wells. Hence the reliance on federal grants. But such stop-gap measures cannot go far unless accompanied by thoroughgoing efforts aimed at revamping and rehabilitation of the ailing organization. Earlier, a study reportedly ordered by Lesco identified 26 reasons for line losses, including high tariff, deteriorating law and order situation, non-cooperation of law-enforcement agencies, theft through hooking of power cables, manipulation of neutral wire and changing of phase polarization. Technical reasons included overloading, unbalancing and improper connection/ installataion of transformer, overloading of conductor, lengthy feeders, improper loose joints, long low voltage lines and their inappropriate path, inadequate clearance of lines from buildings and trees, flaws in meter design, making them prone to theft.

The authority to be able to achieve a substantial reduction in line losses must concentrate on technical improvement and show increase in revenue collection by recovery of running or dead arrears, reduction in operating expenses through financial control of expenditure in relation to revenue collection and balanced approach to profit and loss viz-a-viz liquidity. The electricity distribution companies would have to remain more vigilant and alert in the discharge of their duties, ensuring greater accountability. But they could not even strengthen their one-window operation and ensure its implementation in letter and spirit so that people could get relief. Domestic consumers as well as government departments have been complaining for long of excessively high bills most of which are delivered towards the end of the month. Coupled with recurrent increase in tariff it has had a devastating effect on the consumer. Electricity is a key factor in the cost of production. Repeated, unjustified, increase in its rates runs counter to the initiative to revive the economy. Every increase in power raises the cost of production and services and impacts inflation and exports, not to mention the rapid erosion of the consumer’s purchasing power. Adequate improvement in management, including elimination of corruption, recovery of arrears from all defaulters, both public and private, can help to balance out income and expenditure to provide relief to the hard-pressed consumer and much-needed fillip to the economy.

Diversification of power resources, particularly the untapped potential of 40,000 megawatts from hydro power, is a key unutilized option. Its importance increases as the unit cost of power, after incorporation of the cost over-runs into the overall production, goes up to make industry and agriculture uneconomical.

Large dams, while a source of cheaper electricity, are politically controversial and there is also growing concern about their environmental impact and human displacement. Especially in view of the IPPs’ experience, accelerated measures were required not only to improve governance of energy utilities, but also to build small dams and reservoirs and adopt innovative measures to provide abundant and affordable power.

Currently, our storage capacity is only 11 per cent of the total surface water, while we are generating 16 per cent hydro power from our total potential. Suitable locations for small hydro power projects, as developed by China, can be identified and private investment as well as joint ventures promoted for the purpose. The capital cost in the case of coal-fired plants is also a subject of objection, apart from environmental impact.

But there is technology available all the same to reduce their polluting effect and make effective use of this resource which is abundantly available in the country but contributes less than five per cent to the total energy production.

Nuclear energy involving vast initial investment has been characterized by understandable self-restraint. But then the promising renewable energy field, which can open new vistas of energy development for us, has also been neglected. A balanced and comprehensive approach to the development of available resources is required to meet our long-term energy needs.