Shehbaz vows to check power theft, Nepra seeks tariff hikes amid reduced consumption

Prime Minister Shehbaz Sharif on Monday vowed to check power theft and stressed the need for shifting to renewable energy not only to decrease the tariffs but also successfully face the challenge posed by climate change. 

He said there was an urgent need to transform the power plants fuelled by expensive fossil fuels – diesel and furnace oil – to renewables, adding that the wind, solar and hydropower projects would produce long-lasting positive effects.

Addressing a meeting held to review the latest developments in power sector, the prime minister also talked about the poor transmission system which, he said, must be improved to achieve the desired goals.

Shehbaz praised the Punjab government for the steps taken to arrest power theft and asked the other provinces to follow the suit. 

Different mafias were draining the precious resources, said the prime minister who described crushing these elements as a prerequisite for the economic development and prosperity of Pakistan. 

Higher electricity tariffs are consistently curbing the demand which witnessed another 12 per cent decline by February-end in the first two months of the year. That’s why the National Electric Power Regulatory Authority (Nepra) has indicated further increase in prices under the quarterly tariff adjustment (QTA) for the period January-March 2024. 

The warning comes as the International Monetary Fund (IMF) is pressing Pakistan for energy tariff hikes to deal with the circular debt which has been, in fact, multiplying despite the repeatedly increased power and gas prices.

Hence, the solution prescribed for addressing the challenge is worsening the situation by easing the power consumption at an alarming rate and thus nullifies the very target of boosting the revenue collection while also hampering the business activities at a time when the skyrocketing costs of doing business – a combination of inflation and high interest rates – have paralysed the economy. 

Nepra noted that the capacity payments made to the power producers were 60 per cent of the electricity prices, representing a ratio which is much higher when compared with international standards and other countries.

In this connection, the regulator directed the Central Power Purchasing Agency (CPPA) to work on reducing the capacity payments, which was determined at Rs2.75 for October-December – the second quarter of the fiscal year 2023-24 – and would be collected through the monthly bills of April, May and June. 

One must remember that the rupee devaluation has boosted the capacity payments because the rates fixed in the agreements signed with the power producers are in dollar while the failure to check line losses and power theft is also responsible for the burdening the consumers.

On the other hand, increase in electricity prices has not only dampened the consumption by existing consumers but also made the people hesitant to opt for obtaining new connections – a process also made complicated by the bureaucratic red tape.

At the same time, the affluent consumers, responsible for the bulk of share of electricity consumption, are switching to solar power.

This process is further encouraged by a massive decline in solar panel prices in international market thanks to the cheaper Chinese products dumped around the world – a phenomenon that is accelerating the US-China trade war.

The United States is accusing the Asian giant of crushing other developed economies due to the so-called “Chinese excess production capacity” promoted by the state subsidies in the case of solar energy and electric vehicles (EVs) – an allegation vehemently denied by Beijing which says this stance is an excuse for justifying US protectionism.

Former president Donald Trump had imposed US tariffs to discourage Chinese exports and the Biden administration is continuing with these tariffs but may also sanction new ones. 

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