ISLAMABAD, Aug 28: The tariff for all companies of the Water and Power Development Authority is likely to be increased by an average of five per cent or more than 20 paisa per unit in the second week of September.

Sources in the power ministry told Dawn that the National Electric Power Regulatory Authority (Nepra) was planning to approve one-year tariff for the distribution companies on a trial basis to monitor its results instead of allowing a three-year tariff plan as demanded by the firms.

The sources said the government did not oppose the decision because the distribution companies were not on the immediate privatization list and the power regulator wanted to assess and analyze the impact of differential tariff for all the firms before implementing a long-term tariff.

Under various covenants with multilateral agencies, the government has to introduce a differential tariff for all the companies to replace the existing uniform tariff as part of corporatization of Wapda and power sector reforms.

The impact of varying loss levels of the companies would be picked up by the government as subsidy, the sources said.

They said Nepra had finalized an outline for tariff revision based on separate petitions of the distribution companies and public hearings.

However, its announcement was pending because of delay in a decision by the ministries of finance and water and power on how to provide subsidy to the loss-making companies to keep the tariff uniform across the country, the sources said.

They said Nepra had indicated to the power ministry that about five per cent increase in power purchase price from the National Transmission and Dispatch Company would be unavoidable in view of increase in furnace oil price from Rs12,000 to Rs18,000 per ton and higher dependence on thermal power during the March-May quarter.

They said initial estimates suggested that four distribution companies in Punjab would continue to be in profit after the tariff revision but those in Quetta, Hyderabad, Peshawar and Multan would remain in loss, which would become unbearable if subsidy was not provided.

They said one option being considered was that the power ministry should retain a part of the profit of the profitable companies in a centralized fund and extend subsidy from it to those in loss.

The second option under consideration was that the government should provide subsidy to the loss-making companies so that their consumers were not burdened, they said. The decision of the power and finance ministries would be provided as part of a policy guideline to Nepra, which would then give its final determination accordingly, they said.

They said the dependence on furnace oil had reduced since June because of better water availability and the situation was expected to remain so in the coming months, which would have to be taken into account by Nepra.