Automatic provincial power dues’ adjustments against NFC Award proposed
ISLAMABAD – The Federal government is considering a proposal under which the amounts owed by provinces and / or their departments to the power sector shall be automatically adjusted from the share allocated to the respective province in National Finance Commission Award.
The proposed National Electricity Policy 2021 has recommended that the agreed upon amounts owed by provinces and / or their departments to the power sector, shall be automatically adjusted from the share allocated to the respective province in accordance with the Article 160 of the Constitution and departmental budgets, documents of the NEP 2021 available with The Nation reveals.The Cabinet Committee on Energy (CCoE) had last week recommended the proposed National Electricity Policy 2021 for presentation to the Federal Cabinet.According the proposed National Electricity Policy 2021, financial sustainability of the power sector is premised on the recovery of full cost of service, to the extent feasible, through an efficient tariff structure, which ensures sufficient liquidity in the sector.The NEP 2021 has recommended the automatic adjustments of provincial power dues from the NFC share allocated to the respective province in accordance with the Article 160 of the Constitution.Article-160 of the constitution 1973 provide for the constitution of National Finance commission consisting of the Minister of Finance of the federal government, the ministers of Finance of the provincial governments and such other persons as may be appointed by the President after consultation with the Governors of the provinces. The NFC decides about the award which determines the shares of the federal government and provinces in taxes for five years.
It is the duty of the National Finance Commission to make recommendations to the President as to the distribution between the federation and the provinces of the net proceeds of the taxes, the making of grants-in-aid by the federal government to the provincial governments; the exercise by the federal government and the provincial governments of the borrowing powers conferred by the Constitution; and any other matter relating to finance referred to the Commission by the President.Currently the provinces and their departments owe billion of rupees to power sector which is affecting the financial health of the power Distribution Companies (Discos) and the deduction from NFC share is proposed for the timely payment of the dues by the provinces, official source said.
The NEP 2021 further proposed that Nepra shall align adjustments in generation-end tariff with the consumer end tariff, which shall be submitted by the licensees and determined by the Regulator in a timely manner, in respect of both quarterly and monthly adjustments.In view of various parameters, including (a) the socio-economic objectives; (b) budgetary targets in field; and (c) recommendations of the Regulator with respect to consumer-end tariff for each state-owned distribution company, the government may continue to propose uniform tariff across the consumers and regions. In pursuance thereto, the Regulator shall, in public consumer interest, determine a uniform tariff (inclusive of quarterly adjustments) for all the state-owned distribution companies. Additionally, government may maintain a uniform consumer-end tariff for K-Electric and state-owned distribution companies (even after privatization) through incorporation of direct / indirect subsidies.
In due course, financial self-sustainability will eliminate the need for government subsidies (except for any subsidies for lifeline, industry or agriculture consumers, as per prevailing government considerations). The subsidies that are to be provided by the government shall be released in a timely manner to contribute to the financial sustainability of the power sector, the policy recommended.The Regulator, in order to ensure liquidity of the power sector, provide a level playing field for the development of wholesale market and to facilitate prudent projects of the Government, may impose additional charge(s) which shall be deemed to be costs incurred by the distribution companies / electric power supplier(s). Such additional charge may take into account the sustainability, socioeconomic objectives and commercial viability of the sector, affordability for the consumers and the policy of uniform tariff. Similarly, the Government may also incorporate, in the consumer-end tariff, any surcharge imposed by it, which shall also be deemed to be cost incurred by the distribution companies / electric power supplier(s) and shall be collected by them in discharge of their public service obligations.
Distributed generation is a growing and recognized phenomenon in electricity markets worldwide. The Regulator will devise facilitative guidelines for registration of distributed generation (i.e. consumers connected to the grid) with distribution companies. Such registration process shall enable incorporation of distributed generation in integrated planning and demand projections by the concerned entities. Further, the Regulator shall devise roadmap for the progressive elimination of licensing requirements for distributed generation.
The NEP 2021 further recommended that Nepra will provide for recovery of costs arising on account of distributed generation and open access in the consumer-end tariff, as decided by the Government. Further, the government may announce, from time to time, various concessional packages to incentivize additional consumption to minimise such costs.
Article source: https://nation.com.pk/27-Apr-2021/automatic-provincial-power-dues-adjustments-against-nfc-award-proposed