ISLAMABAD, Jan 9: After having failed to bring about improvement in the performance of the state-run power utilities despite the deployment of army personnel, the government is considering developing a medium-term financial recovery plan (FRP) for Wapda and the KESC with the assistance of the World Bank, it is learnt.
The finance ministry documents suggest that the proposed financial recovery plan (2004-08) would focus on actions needed to bring all Wapda distribution companies on a financially sustainable path in the light of experience of the financial improvement plans (FIPs).
In fact, the World Bank has been asked to prepare an financial recovery plan for the power utilities which would be adopted by the government keeping in view its social and political consideration, a senior official told Dawn.
The targets set under the financial improvement plans were never achieved by the government, and these were revised time and again and waivers were secured from the International Monetary Fund (IMF) for three times on different grounds.
The financial recovery plan 2004-08 would also cover pricing issues and differential tariff, institutional changes necessary to improve bill collection from Fata, institutional changes to strengthen regulatory processes, and ensuring timely implementation of tariff adjustments determined by Nepra.
The two utilities have consumed over Rs300 billion from the public exchequer during the last five years of which more than Rs100 billion were injected during the last two years.
The losses of these utilities during the 2003 fiscal year alone were close to one per cent of GDP, whereas the total budgetary support to these entities was around 1.8 per cent of GDP.
Despite this, the losses of Wapda and the KESC were 2.2 per cent and 1.8 per cent higher than the FIP targets, respectively during the first quarter of the current fiscal. Current losses of Wapda and the KESC stood at around 25.6 per cent and 41.7 per cent, respectively.
The official documents suggest that the power sector still requires large investments because over 40 per cent of the population still do not have access to electricity, as investments in distribution and transmission during the past decade were not adequate and the networks were in urgent need of rehabilitation and expansion.
The government is of the view that operational inefficiencies, weak bill collection, high levels of transmission and distribution losses due to theft and leakage, high cost of furnace oil, relatively high cost purchases from Independent Power Producers (IPPs) including payments for large unutilized generation capacity and subsidy to domestic and agriculture consumers are the main factors responsible for continued losses.
The process of creation of a competitive electricity market with new power system operating rules that also include differentiated tariff regime for all the distribution companies will be implemented once the fully corporatized system of Wapda is operational by end-June 2004.