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Discos seek permission to levy additional FCA charges for July 2023

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1 year ago

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  • Nepra questions management of coal-based plants.
  • Nepra questions why consumers to shoulder NTDC’s inefficiencies.
  • “Why should consumers cover capacity payments?”

ISLAMABAD: The costly imported coal inventory held by coal-based power plants, along with system limitations such as the HVDC transmission line’s inability to fully transport cost-effective power from southern generators are imposing a significant financial burden on power consumers, The News reported Thursday, citing National Electric Power Regulatory Authority (Nepra).

Consumers are grappling with high unit prices, resulting in billions of rupees being paid each month due to these constraints the power regulator said during a public hearing on the petition of state-run power distribution companies (Discos) to levy Rs1.58/unit additional charges on power consumers on account of monthly Fuel Charge Adjustment (FCA) for July 2023.

Nepra said that in July 2023, the situation led to consumers covering a cost of Rs1.5 billion because of system constraints, however, the regulator was not ready to pass this burden on to the power consumers.

With nationwide protests sparked by escalating electricity bills stemming from increased electricity costs, consumers should anticipate a cumulative burden of Rs22.73 billion in their September 2023 bills.

While coal-based power plants are generally recognised for their cost efficiency, a startling revelation emerged during the hearing. The Sahiwal coal power plant, despite Nepra’s reference tariff of Rs16.18 per unit, submitted claims for Rs27.7 per unit.

The regulator underscored that coal-based dispatches from two power plants totaled just 2,200 MW, a significant deficit compared to their combined capacity of 3,900 MWs. If these plants were operational, the per-unit cost could have been reduced, the regulator highlighted.

Intriguingly, electricity generation from the Sahiwal plant registered zero output in April, a mere 3% in May, and 8% in June. Nepra questioned the management of these coal-based plants, which possess lower base tariffs but report higher claimed tariffs, stating, “We need an explanation.”

The petitioner, CPPA said since there was an inventory of coal lying with the Sahiwal coal power procured at around $400/ton, it had been consumed for power generation. Power regulator officials said that prices of coal had come down to $100 per ton. But the costly imported coal inventory led to a high cost of generation.

Nepra grilled the National Transmission and Despatch Company (NTDC) for disregarding transmission system inefficiencies, especially concerning the HVDC ±660 kV Line. This line’s inadequacy in evacuating cost-effective energy from southern generators, including coal-based plants in Port Qasim, Hub and Thar, raised concerns.

Presently transmitting 2,800 MW, the HVDC falls short of the government’s contracted capacity of 4,000 MW. Remarkably, an NTDC official revealed that the government pays for 4,000 MW capacity regardless of actual power transportation when questioned about capacity charges.

The authority questioned the rationale behind consumers shouldering NTDC’s inefficiencies. The NTDC’s shortcomings were found to breach the merit order, leading to the operation of costly plants. The regulator also highlighted the collapse of 138 towers of 220Kv in the past five years.

Managing Director of NTDC, Engr Dr Rana Abdul Jabbar Khan, noted that Nepra had withheld payments of Rs38.94 billion since September 2019, significantly impacting business operations. The MD mentioned that despite 41 World Bank and foreign-funded projects, the government’s year-long ban on LC openings has hindered project completion. NTDC asserted that the HDVC would operate at full capacity soon with the development of two transmission lines.

Regarding tower collapses, Khan attributed the weakening to material theft on remote transmission lines in Sindh. NTDC has initiated FIRs (first information reports) and engaged local participation, alongside law enforcement, to curb theft.

Several previous adjustments worth Rs3.34 billion were deferred pending technical verification by Nepra. Though currently postponed, this amount is expected to appear in future months and will be charged to consumers.

It’s worth noting that the Central Power Purchasing Agency (CPPA) initially claimed an increase of Rs2.06 per unit, which was later revised downward to Rs1.579 per unit due to the deferment of Rs3.34 billion and the actualisation of Rs3.668 billion invoices. These adjustments had a net impact of 0.49 per unit, deducted from the earlier claim of Rs2.07 per unit.

Government officials have proposed the utilisation of a weighted average cost of coal for operational purposes, with the aim of generating more affordable electricity from the plant. 

Nepra officials expressed dismay over the oversight of this more cost-effective electricity generation option, highlighting the imposition of costly electricity generation that burdens consumers. 

The regulator posed the question, “Why should consumers cover capacity payments?”

It was noted that consumers had paid investment costs for stabilising the grid. The country has been facing such issues since 2017 as there was no stability in the grid. 

There is expensive electricity generation due to grid issues as power plants generating expensive electricity were being operated. Nepra sought a report regarding investment made for grid stability but no work was done in this regard.

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Positive IMF negotiations propel KSE-100 Index above 94,000 points

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As a result of investors’ optimism about the reported progress in the continuing talks with the International Monetary Fund (IMF), the Pakistan Stock Exchange (PSX) experienced a robust surge.

The benchmark KSE-100 Index of the PSX, which tracks market sentiment, rose 713 points to a new record high of 94,068 points, breaking above the 94,000-point barrier, as the trading session began.

Early in the day, the stock market began its upward trajectory as the KSE-100 Index steadily rose, gaining 574 points to reach 93,932 points. A possible agreement with the International Monetary Fund (IMF) might lead to more fiscal stability and back Pakistan’s economic reforms, which is why investors are so optimistic about the country’s future.

Officials from the Federal Board of Revenue (FBR) informed the International Monetary Fund (IMF) on Wednesday that the government would not be introducing a mini-budget and would instead continue to aim to collect Rs12,970 billion in taxes each year.

In line with continuing discussions with the Fund, FBR sources revealed that petroleum goods will not be subject to the General Sales Tax (GST).

The fact that Pakistan’s tax-to-GDP ratio has increased from 8.8% to 10.3%, a 1.5% gain viewed as a favorable sign of Pakistan’s fiscal policies, has reportedly pleased the IMF, who has voiced satisfaction at Pakistan’s recent economic performance.

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Provinces must inform IMF team of the postponed legislation for 45% agricultural tax.

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The visiting International Monetary Fund (IMF) delegation is scheduled to meet with provincial government leaders today to examine progress in implementing a tax on agricultural income of up to 45% and discuss the execution of other fiscal policies.

The agricultural income tax was to go into effect on January 1, 2025, after the provincial governments were given until October 31 to pass the necessary legislation. Nevertheless, the deadline was missed by every single province.

Rumor has it that neither Sindh nor Balochistan have moved forward with the tax on agricultural income bill, despite approval from the Punjab government and a draft being developed in Khyber Pakhtunkhwa.

All four provinces have signed the National Fiscal Pact as per the conditions set by the IMF. The reason(s) for the delays will be explained to the IMF delegation.

Federal spending on things like healthcare, social security, and regional infrastructure development is expected to be transferred to the provinces under the IMF agreement, according to sources from the Ministry of Finance. Provincial governments have been singled out by the IMF delegation as key players in tax and economic reform efforts.

Reviewed Here: FBR Excludes Mini-Budget and GST on Petrol from IMF Negotiations

The provincial budget surplus targets will also be briefed to the IMF delegation, according to the sources. The four provinces were supposed to achieve a total surplus of Rs342 billion in the first quarter, but they only managed to manage Rs182 billion. A large portion of the deficit was caused by the Rs160 billion budget deficit in Punjab.

The government’s pledge to retain the annual tax target of Rs12,970 billion was reaffirmed by the Federal Board of Revenue (FBR) on Wednesday, who also confirmed that no mini-budget will be implemented.

In line with continuing discussions with the IMF, FBR sources have also said that petroleum goods will not be subject to the General Sales Tax (GST).

According to sources, the International Monetary Fund has voiced its approval of Pakistan’s recent economic performance, highlighting the country’s improved fiscal policies, which have led to a 1.5% increase in the tax-to-GDP ratio, from 8.8% to 10.3%.

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Petrol prices are expected to experience another increase in Pakistan.

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The inflation-affected nation is expected to encounter another increase in petrol prices, with recommendations indicating a rise of Rs. 2.58 per litre for petrol and Rs. 5.91 per litre for high-speed diesel.

Sources indicate that, if sanctioned, petrol prices will ascend to Rs. 250.96 per litre, whereas high-speed diesel will be priced at Rs. 261.05 per litre.

Sources indicated that the suggested increase is due to the elevated premium on petroleum products in the worldwide market and rising import expenses.

The premium on imported petroleum products has increased, leading the government to contemplate pricing modifications effective November 16, sources indicated.

On October 31, the federal government published the prices of petroleum products for the upcoming fortnight, increasing the prices of petrol and high-speed diesel.

A notification announced an increase in petrol price by Rs 1.35, raising it to Rs 248.38 a litre. The price of high-speed diesel was fixed at Rs 255.14 per litre after an increase of Rs 3.85.

Also read: Pakistan’s weekly inflation jumps to 15.02pc

Simultaneously, the costs of light diesel and kerosene oil were reduced. The statement states that kerosene oil is priced at Rs 148.5 per litre following a reduction of Rs 4.92.

The cost of light fuel was reduced by Rs 2.61 to Rs 147.51 per litre.

The rampant hike in the prices came at the time when the weekly inflation, measured by the Sensitive Price Indicator (SPI), witnessed an increase of 0.28 percent for the combined consumption groups during the week ended on October 17, the Pakistan Bureau of Statistics (PBS) reported.

According to the PBS data, the SPI for the week under review in the above-mentioned group was recorded at 319.79 points as compared to 318.91 points during the past week.

In comparison to the same week last year, the SPI for the combined consumption group during the reviewed week experienced a 15.02 percent increase.

The weekly SPI with the base year 2015-16 =100 covers 17 urban centres and 51 essential items for all expenditure groups.

Likewise, SPI for the lowest consumption group of up to Rs 17,732 witnessed increase of 0.27 percent and went up to 313.74 points from last week’s 312.91 points.

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