ISLAMABAD, July 23: The World Bank and the government have agreed to tax five profitable distribution companies of Wapda and use the collection to improve the financial health of three loss- making companies to maintain a subsidized uniform electricity tariff throughout Pakistan for five years.
Currently, Hyderabad, Quetta and Peshawar electric supply companies are in the red because of heavy line losses and if translated on purely commercial lines, their consumer tariff could be unbearable and touch up to Rs10 per unit in some cases.
On the other hand, Lahore, Islamabad, Faisalabad, Gujranwala and Multan electric supply companies are earning profit and their tariff would remain static or even reduce below Rs3 per unit. The objective is to impose a tax on these five profitable companies is to subsidize loss-making companies for five years.
A World Bank energy mission led by its South Asia unit head for energy and infrastructure Penelope J. Brook is currently in Pakistan to firm up arrangements for a workshop to prepare a long-term strategy for consumer power tariff beyond five years and on the question as to how to make the electricity prices socially sustainable in the post-corporatization period.
Meanwhile, the corporatization process of Wapda has been held up because the World Bank has refused to give consent for the transfer of Rs400 billion assets and Rs126 billion liabilities of Wapda to the proposed 12-corporate entities unless it was provided with a reasonable loan repayment schedule, a senior government official told Dawn.
A letter of consent (LOC) to be issued by nine foreign lenders led by the World Bank is a pre-requisite for the legal transfer of Wapda assets and liabilities to 12-corporate entities under the $1.5 billion corporatization of Wapda and power sector reforms programme.
The government was required to achieve this milestone before June this year but under the recently revised agreement with the International Monetary Fund (IMF), the legal transfer of assets and liabilities to the corporate companies should be completed by December this year.
A senior official at the ministry of water and power said the government had asked the World Bank to issue the letter of consent as soon as possible. The World Bank responded that it was not satisfied with the loan repayment mechanism and the schedule submitted to it, and hence it could not issue a letter in the given circumstances.
General manager Wapda (finance) Mohammad Amjad, however, assured that the utility was already working on revised financing plans of three companies with certain changes in the basic parameters indicated by the World Bank. The revised plans would be submitted to the World Bank within a couple of weeks, he assured the visiting delegation.
The legal transfer of Wapda assets and liabilities to 12- corporate companies would also enable the National Electric Power Regulatory Authority (Nepra) to announce separate tariffs for all the 12-corporate companies before January 1, 2004, which would become effective from July 1, 2004.
Total Wapda liabilities (loans payable to foreign and local lenders) have been estimated at Rs126 billion while total Wapda assets have been put at around Rs400 billion.
Of the total liabilities, around Rs90 billion worth of loans have been identified as transferable to 12-corporate entities. This require approval from nine foreign lenders and as many local lenders including the federal government itself.
Currently, the Wapda shares are in the name of the President of Pakistan and chairman of the umbrella organization Pakistan Electric Power Company (Pepco) has been given the powers to use proxy vote on behalf of the government of Pakistan.
Once the lenders’ approval is available, these shares and titles of ownership would stand transferred to 12-corporate companies for all legal, operational and financial independence.
