ISLAMABAD, Oct 2: The cash shortfall of Water and Power Development Authority is expected to be close to Rs30 billion (0.8pc of GDP) in 2002 and will eventually be borne, to a large extent, by the budget in the form of deferred debt service payments, says the IMF.

“Wapda’s financial performance has been shaky over the past years and has sharply deteriorated in 2001-2002,” states the 2002 Country Report of the IMF.

The report, quoting World Bank, said that this poor financial performance is attributable to (a) weak bill collection, including from the public sector; (b) high levels of transmission and distribution losses (about 25 per cent of units generated or purchased), due to theft and leakage; (c) inadequate tariff adjustments, which did not reflect increased fuel prices in 1999-2000; (d) increased purchases from independent power producers, including payments for large unused generation capacity; and (e) the decline in the share of hydropower generation as a result of the drought.

Over the past decade, the government has tried to comprehensively reform Wapda to increase its efficiency through competition, accountability, managerial autonomy, and market incentives. The reform process, according to the IMF country report, gained momentum with (a) financial restructuring entailing tariff increases in 1998-99 and large debt-for-equity conversion of Wapda’s service liabilities to the government; (b) the appointment of new management team entrusted with the responsibility of improving governance and efficiency; (c) the launching of a corporatization process, with the unbundling of Wapda in one transmission, eight distribution and three generation companies; and (d) an improved regulatory framework, in particular the adoption of a formula-based tariff adjustments for fuel costs.

“These measures, however, implemented rather slowly and sometimes not consistently,” the report said.