ENERGY
NEWS COVERAGE PERIOD FROM FEB 24 TO MAR 01, 2020
AGP DETECTS LOSSES OF RS 3.384 BILLION IN KP ENERGY & POWER DEPARTMENT
By RECORDER REPORT on February 24, 2020
The Auditor General of Pakistan (AGP) has detected two cases of the non-recovery of a huge amount of Rs.3384.794 million in the accounts of the Energy and Power Department of Khyber Pakhtunkhwa, says AGP Audit Year 2016-17.
The audit report has already been tabled in the provincial assembly that has referred it to the Public Accounts Committee (PAC) of the house. The KP Assembly comprising of the representatives of all parliamentary parties is headed by the Speaker of the house.
The report said that during the financial year 2014-15, it was noticed in the office of the Pakhtunkhwa Energy Development Organization (PEDO) that Director O&C PEDO has claimed energy tariff dues worth Rs.2,386,794,000 relating to Malakand-III Hydel Power Project from National Transmission and Distribution Company (NTDC) through Central Power Purchase Agency (CPPA) on monthly basis.
In response, the CPPA did not pay the amount in accordance with the provision of article 9.6 of the CPPA. It was further found that the payment of dues cleared by CPPA did not match the claims of PEDO rather paid lesser amount in most of the period.
Furthermore, the CPPA did not pay energy charges according to claim of the PEDO rather from the months of February to June, lesser amounts were paid as compared to actual claim of the PEDO while in the earlier excessive. Moreover, the payment from CPPA did not have any reference to the payment claimed by the PEDO, therefore, it could not be ascertained as to which period the dues were cleared and how much is outstanding.
The local office did not carry any reconciliation of dues and also did not have any proof of receipt of payment because all the payments were directly made to the bank account. Audit was of the view that all payments made by the CPPA were required to have been properly reconciled on monthly basis and recorded in the lodgers separately with clearly shown amount of outstanding dues, if any, against the CPPA, but neither record was available nor any action taken towards reconciliation and recovery of outstanding dues by the local administration. So the audit attributed the less realization due to weak financial and internal controls and when pointed out, the management stated that written reply would be furnished later on.
The Audit requested the department repeatedly, through DO letters, for holding the Departmental Accounts Committee (DAC) meeting. However, neither DAC meeting was convened nor any progress intimated to it. Therefore, the audit recommended investigation into the matter and reconcilement of the all claims with CPPA and recovery of the outstanding amount.
The second case of the non-recovery to the tone of Rs.998.00 million was noticed during review of joint verification report of the monthly generation and export of energy to PESCO from the Pehur Power Complex and payment of outstanding dues made by the quarter concerned, than an amount of Rs. 2,313,000 was less paid as compared to the claims made during the year.
However, the payment so made did not have any reference to which period the payment relates. The details showed that an amount of Rs. 46,037,000 was paid by PESCO against the demand for payment of Rs. 48,351,000 sent to them during the period under audit while the difference remained unpaid. Furthermore, payment was made directly to bank on on-line basis therefore the local office has no documentary evidence in support of payment.
When pointed out, the management replied that it was decided with PEDO that the energy generated would be sold to WAPDA@Re1/KWh has an interim arrangement and once the tariff is determined by NEPRA and power purchase agreement (PPA) signed with PESCO, the arrears would be claimed.
Since PPA has not been signed with PESCO/NTDC they are receiving payment of energy sold @ Re.1/KWh. As such, Rs. 998,000,000 have been accumulated against PESCO and the amount is not loss, rather outstanding payment. This reply of the department was declared not tenable.
Despite the repeated requests of the audit through DO letters, for holding of the DAC meeting, neither the DAC meeting was convened nor was any progress intimated till finalization of the audit report. The audit has recommended the recovery of the outstanding amount.
Copyright Business Recorder, 2020
ENERGY IMPORTS TO RISE AS PRODUCTION DROPS
By Salman Siddiqui Published: February 28, 2020
KARACHI: Pakistan’s reliance on imported energy is expected to mount ahead of an economic turnaround as domestic production has continued to drop amid no major new discoveries for quite a long time.
Meanwhile, the government has not yet auctioned new exploration blocks in the country.
Pakistan’s second largest oil and gas exploration firm, Pakistan Petroleum Limited (PPL), reported an 11% drop in gas production to 126,934 million standard cubic feet (mmscf) in the first six months (Jul-Dec 2019) of the current fiscal year compared to 142,441 mmscf in the same period of last year.
Similarly, its crude oil, natural gas liquids and condensate production fell around 6% to 2.69 million barrels in the half-year period compared to 2.86 million barrels in the corresponding period of last year, according to PPL’s detailed half-yearly report sent to Pakistan Stock Exchange (PSX).
“PPL is not the only exploration firm whose production is on the wane, but almost all the oil and gas exploration and production firms are experiencing the same trend in the country,” JS Global Research analyst Arsalan Ahmed said while talking to The Express Tribune.
The hydrocarbon production is dropping continuously due to no new major discoveries for quite a long time.
“Production from wells is high in the beginning but drops gradually over a period of time. The country has continued to take production from old fields, which is why the drop is being experienced for quite a long time,” he said.
Ahmed emphasised that exploration firms needed to step up efforts for making new discoveries. However, the government has yet to auction new blocks for finding fresh oil and gas deposits in the country.
Current and previous governments have not auctioned new exploration blocks for around three to four years now. The current Pakistan Tehreek-e-Insaf (PTI) administration has been working for months to sell new blocks.
“At present, the company’s portfolio, together with its subsidiaries, consists of 48 exploratory blocks, out of which 28 are PPL-operated (including block-8 in Iraq being operated by PPL Asia) and the remaining 20, including three offshore blocks in Pakistan and one onshore block in Yemen, are partner-operated,” PPL reported.
In the PPL-operated blocks, four wells (two exploratory and two development) were drilled in the first six months of FY20 compared to the drilling of three exploratory wells in the corresponding period of last year, the state-owned firm said.
Two discoveries were made during the period under review – one in a PPL-operated block ie Margand X-1 (Margand block) and another in a partner-operated block ie Bitro-1 (Latif block), it said.
The analyst said the country’s reliance on imported energy may increase in the absence of no new major oil and gas discoveries for several years. Demand for energy would surge ahead of an economic turnaround, which was in the offing, he said.
PPL’s profit decreased 21% to Rs24.55 billion (earnings per share Rs9.02) in the six-month period under review compared to Rs31.03 billion (earnings per share Rs11.41) in the corresponding period of the previous year.
The oil and gas exploration company continued to bear unprecedented stress on its liquidity on account of muted collection from government-nominated natural gas customers, PPL said in the report. Total receivables increased 24% and stood at Rs282 billion on December 31, 2019 compared to Rs227 billion on June 30, 2019.
“Your directors consider natural gas and power sector circular debt as the most critical risk to the achievement of strategic objectives of the company. Accordingly, besides escalation of recovery efforts, the company has actively engaged with all key stakeholders at relevant ministries to explore possible mechanisms for the earliest resolution of the subject matter,” it said.
Published in The Express Tribune, February 28th, 2020.
https://tribune.com.pk/story/2165677/2-energy-imports-rise-production-drops/
IMRAN ORDERS CRACKDOWN ON POWER THIEVES
APP Updated February 29, 2020
ISLAMABAD: Prime Minister Imran Khan on Friday expressed satisfaction over the success of staff-level agreement with the International Monitory Fund (IMF) and said the government would not allow anybody to put the burden of corruption and administrative mismanagement in institutions on the common man.
While reviewing government subsidies in various sectors at a meeting, Prime Minister Khan directed the energy division to fully concentrate on busting big power thieves and cartels so that the masses could be protected from exploitation and flaws in the system.
He was earlier informed that as a whole Rs251 billion subsidy was being provided in the energy sector.
The meeting, which was attended by Minister for Energy Omar Ayub, Minister for Planning Asad Umar, Finance Adviser Abdul Hafiz Shaikh, Commerce Adviser Abdur Razzak Dawood, Special Assistant to the PM on Information Dr Firdous Ashiq Awan, was briefed about the provision of subsidies by the government in the energy, food and fertilizer sectors, besides social protection programme and allocations for the promotion of exports and higher education.
PM expresses satisfaction over deal with IMF; reviews subsidies in various sectors; claims govt striving to pass on impact of improvement in economic indicators
The meeting was told that the basic purpose of providing subsidies by the government was to provide relief to the low-income groups and downtrodden segments of society, promotion of industries and to access to the higher education.
The prime minister said it should be ensured that the subsidies should be utilised for their respective purpose and was fruitful for the people for which there was a need to review effects of the subsidies. Mr Khan said IMF’s trust in government’s economic policies and its direction, with protection to the people in the current fiscal year, was the success of his government.
The meeting was informed that the energy sector was given Rs251 billion subsidy. Of this amount, Rs162 billion was allocated for the domestic consumers who used up to 300 electricity units a month. Similarly, Rs8.5 billion was earmarked to provide subsidy for tube-wells (agriculture) in Balochistan, while Rs18 billion was being provided to the people of merged tribal areas of Khyber Pakhtunkhwa, Rs3 billion to the Azad Jammu and Kashmir and Rs25 billion to the K-Electric.
Besides, the meeting was told that the industrial sector was being provided power and gas supply at ‘reasonable’ rates for which Rs10 billion and Rs24 billion, respectively, had been allocated.
About the subsidies being provided to control food prices, the meeting was informed that Rs21 billion subsidy had been announced under the head of the Prime Minister’s Relief Package; Rs2.5bn for the Utility Stores under the Ramazan package; Rs6bn for Gilgit-Baltistan wheat package and Rs8bn for wheat procurement arrears in Gilgit-Baltistan; in addition to billions of rupees allocated to keep prices of wheat flour across the country under control.
The PM was also briefed about the Rs192bn Ehsaas social protection programme along with details of the allocations being provided for Kafalat, Waseela Taleem, undergraduate scholarships, poverty alleviation, shifting of assets and interest-free loans.
Mr Khan expressed satisfaction over an improvement in economic indicators and said the government was fully striving to pass on the impact of economic improvement to the masses.
While reviewing the country’s overall economic situation at another meeting, the PM said since the people were facing hardships due to the previous governments mismanagement, the present government was making every possible effort to provide relief to masses especially the low income groups, salaried class and weaker segments of the society.
Mr Khan was informed that the overall economic indicators of the country were improving, with the weekly Sensitive Price Index (SPI) showing a decline and that was expected to drop further.
He directed the relevant ministries to keep the masses informed about economic stability and improvement in economic indicators in order to boost the confidence of business community.
Federal Minister for Law and Justice Dr Farogh Naseem on Friday called on Prime Minister Imran Khan at the PM Office.
They discussed important law matters during the meeting, according to a press release issued by the PMO.
Meanwhile, three members of the National Assembly from two districts of Khyber Pakhtunkhwa called on Prime Minister Imran Khan and discussed matters pertaining to their constituencies.
Sahibzada Sibghatullah from Upper Dir district and Mehboob Shah and Mohammad Bashir Khan from Lower Dir district called on the premier, while Special Assistant to Prime Minister Nadeem Afzal Chan was also present.
Published in Dawn, February 29th, 2020
https://www.dawn.com/news/1537327/imran-orders-crackdown-on-power-thieves
NEWS COVERAGE PERIOD FROM FEB 17 TO FEB 23, 2020
PM FOR ‘OUT OF BOX SOLUTION’ TO CUT POWER, GAS TARIFFS
Syed Irfan Raza Updated February 18, 2020
ISLAMABAD: Prime Minister Imran Khan on Monday directed the authorities concerned to find “out of the box solution” to bring down electricity and gas tariffs to provide some relief to domestic consumers and reduce inflation in the country.
The prime minister issued the directive while presiding over a high-level meeting on the issue of prevailing high gas and electricity rates that have made the life of the common man miserable.
The meeting was attended by Minister for Energy Umar Ayub, Minister for Planning and Development Asad Umar, Adviser to the Prime Minister on Finance Dr Hafeez Sheikh, Special Assistant to the Prime Minister (SAPM) on Information and Broadcasting Dr Firdous Ashiq Awan and SAPM on Petroleum Nadem Babar.
According to the Prime Minister Office, several proposals were presented during the meeting to reduce gas and electricity tariffs, especially for domestic consumers. Nadeem Babar presented a long-term plan in this regard.
The prime minister was also apprised of the problems confronting gas and electricity producing and supplying companies.
Imran told circular debt will be brought down to zero by end of fiscal year
Prime Minister Khan alleged that the previous governments were responsible for the hike in gas and electricity tariffs as they had made illogical and costly international agreements in the energy sector without realising the purchasing power of the common man. “This resulted in costly electricity and piling up of the circular debt,” he added.
He said provision of relief to the poor and inflation-hit people and promotion of industries were top priorities of his government so that the wheel of the economy could move.
The prime minister was informed that the government was bearing the cost of expensive power plants installed during the previous regimes and the burden of these projects was indirectly affecting the people.
The meeting was told that the government had taken effective measures to control electricity theft and as a result generated Rs122 billion in revenue. Similarly, circular debt has been reduced to Rs12bn per month from Rs36bn. The prime minister was informed that the circular debt would be brought down to zero by the end of the current fiscal year.
The meeting was informed that the present government was not only trying to check the burden of pilferage and line losses through administrative reforms in gas and power sectors, but was also taking measures to ensure the availability of these utilities to domestic and industrial consumers at appropriate rates so that people and industries could get relief.
The prime minister, while talking to a group of reporters at the PM House a few days ago, had expressed dissatisfaction over the hike in electricity and gas rates and assured that these would not be increased in the near future. He was of the view that the high electricity and gas tariff, especially for the industrial sector, was one of the reasons for the rampant inflation in the country.
Published in Dawn, February 18th, 2020
https://www.dawn.com/news/1535167
CABINET DECIDES AGAINST HIKING GAS, POWER TARIFFS
By APP Published: February 21, 2020
ISLAMABAD: The federal cabinet on Thursday decided not to increase the prices of gas and electricity for domestic, industrial consumers and tandoors.
Briefing the media about the cabinet decisions, Special Assistant to Prime Minister on Information Dr Firdous Ashiq Awan said a proposal to cap the prices of diesel and petrol for the next few months was under consideration and a final decision in that regard would be taken in a few days.
Adviser to Prime Minister on Finance Dr Hafeez A Sheikh said that the government’s priority was to provide relief to the masses through the Ehsaas programme and many proposals were under consideration.
The cabinet directed the managing director of the Utility Stores Corporation (USC) to buy ghee and edible oil from mills in Azad Kashmir and the merged districts of Khyber-Pakhtunkhwa to further reduce their prices.
The cabinet was briefed about the government’s strategy to reduce prices of essential commodities. It was noted the prices of daily-use items were declining because of the effective measures taken by the government.
The cabinet was informed that the result of Rs15 billion package for the USC for reducing prices was encouraging. She added that the cabinet was informed that the International Monetary Fund (IMF) in its quarterly and half-yearly reviews had lauded the government’s policies.
Sheikh said that further positive news would come in next few days. He added that 500,000 matric tons of wheat would be imported on low prices as per decision of the Economic Coordination Committee (ECC) of the cabinet.
Firdous said that the cabinet was informed that 2.8 million matric tons of wheat was available in the stocks, which was enough to meet to the country’s requirement. The ECC had decided to release 100,000 tons of wheat each for Sindh and Khyber-Pakhtunkhwa, she added.
The cabinet set this year’s wheat procurement target at 8.25 million tons. About 1.8 million ton wheat would be purchased by Pakistan Agriculture Storage and Services Corporation (PASSCP), 4.5 million tons by Punjab, 1.40 million tons by Sindh, 0.45 million tons by K-P and 0.10 million tons by Balochistan. The procurement would started from Sindh on March 10.
The cabinet noted that the provincial governments were taking effective measures to prevent hoarding of sugar. The ECC had allowed the purchase of 300,000 tons sugar on which regulatory duty had already been waived.
The cabinet was informed that the people were paying the price of long-term costly agreements of past government, Firdous said. “The people have been compelled to buy costly gas for the next 15 years.”
The cabinet decided to simplify input tax payment system for gas exploration and production companies. The operators of gas exploration companies had been allowed to transfer joint input tax to other registered individuals or interested owners, the SAPM said.
During the cabinet meeting, the prime minister directed for expediting the recommendation for introducing electoral reforms to make the election process transparent and to remove reservations of the political parties on a permanent basis.
The cabinet took strict notice of the dearth of life saving drugs and directed the relevant authorities to ensure their availability. The cabinet accorded its approval to the establishment of a permanent secretariat of the Council of Common Interests in the Ministry of Interprovincial Coordination.
Dr Firdous said the cabinet approved the National Commission Child Rights, with Afshan Tehsin as its chairperson. The cabinet also approved the notification of the appointment of the members of Pakistan Nursing Council.
The cabinet approved the appointment of Farhan Shafi as managing director/CEO of the Pakistan Mineral Development Corporation and Sadia Khan as the commissioner of the Securities and Exchange Commission of Pakistan.
The cabinet constituted a committee to finalise Zaireen [pilgrims] Management Policy by emulating Malaysian model. Imran also briefed the cabinet about his telephonic talk with Chinese President Xi Jinping. The Chinese president pledged to facilitate the Pakistani students present in China.
The prime minister also felicitated the foreign minister for making the visit of United Nations secretary general to Pakistan a success. The categorical statement of the secretary general in favour of the Kashmiris was a great diplomatic success of Pakistan, he said.
During the meeting, the ministers offered Fateha for the departed soul of Special Assistant to Prime Minister on Political Affairs Naeemul Haq.
https://tribune.com.pk/story/2161164/1-cabinet-decides-hiking-gas-power-tariffs/
NEWS COVERAGE PERIOD FROM FEB 10 TO FEB 16, 2020
NET POWER SECTOR RECEIVABLES UP 27 PC
Khaleeq Kiani Updated February 12, 2020
ISLAMABAD: The net power sector receivables have increased by about 27 per cent over the last 18 months as overall recoveries struggled to make any significant impact despite a full focus of the authorities and the lending agencies to address power sector challenges.
According to a detailed report finalised by the Power Division, the net receivables of all the distribution companies (Discos) increased to Rs1.037 trillion as of Dec 31, 2019 from Rs817.5 billion on June 2018, showing an increase of 27pc or about Rs220bn. Total private sector receivables during the period also increased by 24pc to Rs830bn from Rs670bn, an increase of Rs160bn.
The data showed that receivables increased by 137pc from the federal government that was driving the power sector efficiency and recovery drive. This was the highest increase in receivables from any sector. The data showed that Discos’ receivables from the federal government stood at Rs7.2bn as of June 30, 2018 but increased to Rs17.1bn by end of December 2019.
The power sector receivables from the AJK government also increased by 28pc to Rs127bn by end-December 2019 when compared to Rs99bn at end-June 2018. Likewise, a 54pc increase was witnessed in the receivables from the provincial governments to Rs62.3bn last month when compared to Rs40.4bn in June 2018.
As such, the receivables from entire public sector consumers increased by almost 41pc to Rs206.2bn as of Dec 31, 2019 when compared to Rs146.84bn in June 2018. As if that was not enough, the receivables on account of government subsidies also increased by 25pc to Rs121.5bn from Rs98bn. The receivables from running defaulters also increased by about 30pc to Rs525bn when compared to Rs405bn 18 months ago.
On the other hand, the total recoveries against total billing during July-December 2019 declined by almost 1pc when compared with same period last year. The data showed total recoveries amounted 92.49pc in July-December 2019 against 93.47pc of same period 2018. The recovery against billing of seven out of 10 Discos dropped during the first half of the current year. Only Gujranwala, Islamabad and Peshawar electric power companies showed improvement. An amount of about Rs76bn against total billing of Rs923bn could not be recovered during the last first half of the current year. Total bill collection during this period amounted to Rs847bn.
Total billing for July-December 2019 increased by almost 24pc to Rs923bn when compared to Rs744bn of same period of previous year. On the other hand, total collection during July-December 2019 amounted to Rs847bn when compared to Rs677bn of same period last fiscal year, an increase of 25pc.
In absolute numbers, the amount of billing increased by about Rs178bn in first half of the current year but collections increased by about Rs170bn.
The power sector is reported to have replaced about 1.122 million defective electricity meters during 1HFY20 including 72,300 three-phase meters.
Aggregate technical and commercial (ATC) losses of the power sector declined by about 1.13pps to 23.23pc in 1HFY20 when compared to 24.36pc of the same period last fiscal. The ATC losses in the private sector, on the other hand, increased by 0.39pps to 22.68pc in first half of 2019-20 as against 22.29pc of same period last year.
Transmission losses in first six months of the current fiscal year slightly came down to 1.5pc from 1.79pc a year ago. Technical and distribution losses also dropped by almost 2.13 percentage points to 16.39pc in July-December 2019 when compared to 18.52pc a year ago.
The data also revealed a continuous increase in the amount of receivables from running defaulters. The amount stood at Rs477bn at the end of June 2019 but went up by about Rs48bn to Rs525bn by end December 2019. This had stood at Rs405bn as of June 2018.
The Power Division reported registration of about 56,000 FIRs against consumers during its anti-theft drive between Oct 13, 2018 and Jan 22, 2020 involving detection bills worth Rs3.96bn of which about Rs2.7bn were actually recovered, with a success rate of 68pc.
A total of about 344,000 applications were reported pending as of Dec 31, 2019 including 182,000 fully compliant with the requirements and ripe for connections.
Published in Dawn, February 12th, 2020
https://www.dawn.com/news/1533963/net-power-sector-receivables-up-27pc
NEPRA DEFERS HEARING OF TARIFF HIKE PETITION
By Our Correspondent Published: February 13, 2020
ISLAMABAD: The National Electric Power Regulatory Authority (Nepra) on Tuesday deferred hearing of a petition filed by the Central Power Purchasing Agency-Guarantee (CPPA-G) for an increase in power tariff under the fuel cost adjustment mechanism for November 2019.
At the public hearing held by Nepra to discuss the proposed tariff hike of Rs0.9836 per unit, the CPPA-G requested the regulator not to conduct the proceedings as it was working on a draft being designed to change the mechanism for fuel cost adjustment.
CPPA-G Chief Executive Officer Abid Lodhi told Nepra it was going to change the mechanism for fuel price adjustment in line with public interest and the draft was being finalised. He asked the regulator to stop proceedings until the draft was finalised and dismissed the impression that the CPPA-G was encountering financial crisis.
For the month of November 2019, the CPPA-G, in the petition filed on behalf of power distribution companies, sought tariff increase of Rs0.9836 per unit to generate additional revenue of about Rs8 billion.
According to the petition, the power distribution companies had charged consumers a reference fuel cost of Rs2.449 per unit in November 2019 while the actual fuel cost came in at Rs3.4713 per unit.
Hence, the CPPA-G asked the regulator that it should be allowed to charge an additional cost of Rs0.9836 per unit from consumers next month.
According to data provided to Nepra, energy generation in November 2019 stood at 7,434 gigawatt-hours (GWh).
Total cost of energy generated amounted to Rs24.86 billion with average per unit fuel cost at Rs3.344 per unit. About 7,204 GWh were sold to the distribution companies for Rs25.01 billion at Rs3.4713 per unit. Total transmission losses in the month were calculated at around 3.1%.
https://tribune.com.pk/story/2155589/2-nepra-defers-hearing-tariff-hike-petition/
GIDC COLLECTION: SC SEEKS REPORT ABOUT MONEY SPENT ON GAS PROJECTS
By TERENCE J SIGAMONY on February 14, 2020
The federal government has been directed to submit how much money, collected under Gas Infrastructure Development Cess (GIDC) has been spent on gas projects and what is the ground situation of the various projects.
According to Gas Infrastructure Development Cess (GIDC) Act, 2015 the cess shall be utilized by the federal government in connection with infrastructure development of Iran Pakistan (IP) Pipeline Project, Turkmenistan-Afghanistan-Pakistan-India (TAPI) Pipeline, LNG or other ancillary projects.
A three-member special bench, headed by Justice Mushir Alam, on Thursday heard 107 petitions/appeals of various textile mills, cotton mills, sugar mills, ceramics companies, chemicals, CNG filing stations, match factories, cement companies and aluminum industries regarding GIDC levy.
Mobin Saulat MD/CEO of M/s Inter State Gas System (ISGS) Limited, appearing on bench directive, informed that the total development and construction costs to be funded through GIDC for Iran-Pakistan Gas Pipeline project is $1,806.06 million. The project development and operational costs were funded by Government Holding Private Limited (GHPL), the parent company of ISGS. The construction of the project will take 36 months after construction contract, subject to easement of international sanctions on Iran. He informed that the legally binding agreement is still in place and Pakistan is still committed to the project.
About Turkmenistan-Afghanistan-Pakistan-India (TAPI) that under the agreement the Consortium Leader of TPCL will inject 85 percent of equity part in TPCL, while the rest of the TAPI members share 5% each of the equity. The project is in the development stage and the government is doing the price review, which would be done in 5-6 months, while will be completed in three years. Pakistan has paid $200 million in equity and $100 million required as development charges.
The Peshawar High Court (PHC) on May 31, 2017, had rejected a set of petitions challenging the validity of the GIDC Act 2015 on the grounds that the transgression of legislative authority by the federation does not qualify as a breach of fundamental rights of citizens and therefore the petitioners before the high court were not aggrieved persons within the meaning of Article 199 of the Constitution and thus have no locus standi to challenge the validity of the act.
The PHC in its judgement had also held that when Article 142 (a) read with Article 154 of the Constitution, it became evident that the parliament had the exclusive authority to legislate on Entries in Part II of the Federal Legislative List of the Constitution.
In April 15, 2015, the apex court rejected the federal government’s petition seeking review of its August 22, 2014 verdict and clarify that the collection of then over Rs100 billion under GIDC Act was not liable to be refunded to the industrial consumers of gas from whom it was recovered.
The then GIDC law had legalised the cess recovery from the non-domestic consumers, mainly industries.
Copyright Business Recorder, 2020
NEWS COVERAGE PERIOD FROM FEB 03 TO FEB 09, 2020
FUND NOT SATISFIED WITH POWER SECTOR’S PERFORMANCE
By MUSHTAQ GHUMMAN on February 5, 2020
The visiting International Monetary Fund (IMF) on Tuesday discussed progress in energy sector reforms, circular debt and power tariff fixation mechanism along with other issues which are part of the programme.
There are indications that the Fund is urging the government to further adjust tariff to achieve full cost recovery for at least five power Distribution Companies (Discos). The demand of further adjustment from the Fund is at a time when the export-oriented industry is making a hue and cry on the imposition of financial cost surcharge, taxes, fixed charges, surcharges and positive fuel adjustment. The Fund’s technical team, sources said, was unhappy with the performance of power sector as many commitments have not been met. Well-informed sources told Business Recorder that in the “defunct” Pakistan Electric Power Company (Pepco) energy sector circular debt was hovering at over Rs 1.9 trillion by December 31, 2019 of which Rs 1.1 trillion is circular debt whereas Rs 850 is parked in Power Holding Private Limited (PHPL). Of this amount about Rs 600 billion has been added by the PTI government of which Rs 500 billion is sourced to inefficiencies of Discos in terms of poor recovery from consumers. Power Division through an advertisement in the print media has sought quotations from Islamic banks for Sukuk of Rs 200 billion to retire a part of the circular debt through competitive bidding.
The Power Division had to upload circular debt retirement plan on its website by January 31, 2020 as per commitment with the IMF but this condition has not yet been implemented. The circular debt is expected to be over 5 per cent of GDP by end December 2019. Over the years, circular debt has stripped the sector of working capital, constraining investment and capacity utilization, leading to unreliable supply that hinders economic growth.
Circular debt refers to the cash flow shortfall incurred in the power sector from non-payment of obligations by consumers, distribution companies, and the government.
The plan, prepared in consultation with international partners and IMF staff, aims to reduce the annual flow of circular debt from the current level to around Rs 50-75 billion by FY 2023 through improving collection and reducing losses, streamlining tariff updates, and rationalizing subsidies. Monitoring of the plan will take place through implementation reports published by the Ministry of Energy. Key measures of the plan include: (i) timely updating tariffs, including the Q2 FY 2020 adjustment for capacity payments to take place by end-January (new end-January 2020 SB); (ii) streamlining of tariff procedures and reintroducing surcharges via amendments to the Nepra Act to be submitted to Parliament by end-December (modified end-December 2019 SB); (iii) improving efficiency and collection; and (iv) rightsizing of subsidies.
The Power Division has prepared circular debt strategy which includes: (i) issuance of new government guarantees in the amount of Rs 200 billion to transfer costly system arrears into PHPL; (ii) absorption of PHPL into the general government, which will lower debt servicing costs; and (iii) reduction in the stock of outstanding payables through the use of power assets privatization proceeds, recoveries from the outstanding stock of receivables, the existing debt servicing surcharge, and the rightsizing of sector-related subsidies. Staff stressed that progress in the stock strategy must be linked to timely and measurable progress in the implementation of the circular debt reduction plan and be consistent with the fiscal envelope.
The government had to submit circular debt retirement plan by September 2019 but the condition was not met and the plan was shared in November 2019.
The government also had to submit to parliament amendments to Nepra Act to ensure full automaticity of the quarterly tariff adjustments and eliminate end-December 2019 the gap between the regular annual tariff determination and notification by the government – this too remains unmet.
Copyright Business Recorder, 2020
https://www.brecorder.com/2020/02/05/568097/fund-not-satisfied-with-power-sectors-performance/
LEARNING THROUGH TECHNOLOGY
By M ZIAUDDIN on February 5, 2020
Without adequate energy supplies, adequate capital and adequate availability of technology no country can stand on its own two feet and protect its sovereignty from being eroded by those on whom such countries, depend for dole.
We can certainly ensure adequate energy supplies within our meagre means if we were to reduce our dependence on costly imported fossil fuel by enhancing power production through non-fossil fuels like windmills and solar. Also we can with the help of latest technologies increase our productivity producing more even with less than adequate financial resources.
But for both we need to acquire the needed technological skills. And that is perhaps why we need to bring about a drastic change in our education system without wasting much time on such non-achievable targets as bringing national coherence in the school syllabus that was introduced during the colonial days. Instead, let us keep our focus on imparting technological skills currently in vogue globally at the school level, so that in due course of time, the entire population as one joins the pursuit of collective well-being of the nation.
Here is an apt suggestion offered by John Goodwin, Chief Executive Officer, The LEGO Foundation (How technology and play can power high-quality learning in schools – published in The Agenda Weekly of World Economic Forum on January 31, 2020) on how to meet the needs of a rapidly evolving economy and society.
Unfortunately, as Goodwin says, many education systems the world over have remained outdated – designed for old industry models and societies of the past. What is needed, therefore, is reasonably adequate investment in the future of global economy by reforming the education system.
While traditional education metrics of literacy and numeracy are vital, society also requires, in the opinion of Goodwin, learners to have a range of holistic skills to thrive in the modern world. These include creative, technology, innovation and interpersonal skills. And today, these skills and knowledge need to be acquired in a more accessible, personalized and active way than ever before.
Six critical characteristics in learning content and experiences have been identified to define high-quality learning in the Fourth Industrial Revolution “Education 4.0″:
- Innovation and creativity skills: Include content that fosters skills required for innovation, including complex problem-solving, analytical thinking, creativity and systems analysis.
- Technology skills: Include content that is based on developing digital skills, including programming, digital responsibility and the use of technology.
- Personalized and self-paced learning: Move from a system where learning is standardized, to one based on the diverse individual needs of each learner, and flexible enough to enable each learner to progress at their own pace.
- Accessible and inclusive learning: In many parts of the world, learning is confined to only those with direct access to physical school buildings, and quality is reserved for those who can afford to pay for learning outside of traditional public schools. Move from this system to one in which everyone, even the most destitute, has access to learning and is therefore inclusive.
- Problem-based and collaborative learning: Move from process-based to project- and problem-based content delivery, requiring peer collaboration and more closely mirroring the future of work.
- Lifelong and student-driven learning: Move from a system where learning and skilling decrease over one’s lifespan to one where everyone continuously improves on existing skills and acquires new ones based on their individual needs.
In the context of job disruption and increased polarization, primary and secondary school systems have a critical role to play in preparing the global citizens and workforces of the future. Education models must adapt to equip children with the skills to create a more inclusive, cohesive and productive world.
Many of today’s school children will work in new job types that do not yet exist, most of which are likely to have an increased premium on both digital and social-emotional skills. They will be introduced to wholly new business models whose workforces are much more distributed. In an increasingly interconnected world, future workers will be expected to collaborate with peers residing in various parts of the globe, understand cultural nuances and, in many cases, use digital tools to enable these new types of interactions.
The outdated systems limit access to the skills needed to drive prosperous economies and pose risks for global productivity. In addition to ‘hard’ skills, such as technology design and data analysis, it is crucial that schools also foster human-centric skills that enable children to shape future societies that are inclusive and equitable.
There is strong evidence that education is a key contributor to relative social mobility, the social and economic status of an individual relative to their parents.
According to Goodwin, in parallel, research has repeatedly underscored that learning through play has a critical role in education and in preparing children for challenges and opportunities throughout their lives. A growing body of evidence supports learning through play as fundamental for children’s positive development, serving as an essential way to foster a range of holistic skills required to thrive in today’s world.
Purposeful learning through play experiences can be, it is said, constructed through a range of active pedagogies to create deeper learning experiences that a child will remember and internalize. Evidence suggests that Learning through play with technology, including hybrid play (experiences that combine digital and physical), provides opportunities for young learners to acquire knowledge across a variety of contexts while developing a range of holistic skills, such as cognitive, creative, physical, social and emotional skills.
Guided experience often occurs through active pedagogies (such as project-based approaches), which give children the opportunity to make independent choices in their own learning and to create their own physical and/or digital artifacts with special meaning to them.
Goodwin says: “Technologies designed to fully embrace opportunities for agency, guidance and creation while allowing playful interaction are some of the most powerful tools we have to support high-quality learning today. Examples of such technologies include creative coding platforms such as Scratch, where here children have an opportunity to create their own stories, games and animations with the support of an on-line community; open ended sandbox games such as Minecraft and Robotics systems of play such as LEGO MINDSTORMS.”
Investments in Scratch support the development and dissemination, ensuring that it remains free for everyone. Scratch is often the first experience kids have with code, in classrooms, camps, clubs, and at home. Learning to code is not simply about gaining a set of technical skills, it’s about developing a voice and learning how to organize, express, and share ideas. Children who make projects with Scratch use coding to bring their ideas to life. Scratch is the world’s largest coding community for young people. When children participate in the Scratch online community, they learn to share ideas, collaborate together, and respect one another in a safe online environment.
Minecraft is a game-based learning platform that promotes creativity, collaboration, and problem-solving in an immersive digital environment. Children build and explore vast virtual worlds with their peers.
LEGO MINDSTORMS are Robotics systems of play. It is a hardware and software structure which is produced by Lego for the development of programmable robots based on Lego building blocks. Each version of the system includes an intelligent brick computer that controls the system, a set of modular sensors and motors, and Lego parts from the Technic line to create the mechanical systems.
According to Goodwin creating a playful learning environment with technology will not deter children from learning the basics of reading, writing and mathematics. On the contrary, creating engaging environments is an opportunity to tap into children’s natural ability to learn through play, while utilizing the transformational power of technology to develop learning experiences that facilitate the rapid learning essential in society today.
Copyright Business Recorder, 2020
https://www.brecorder.com/2020/02/05/568077/learning-through-technology/
1,263MW LNG PLANT TO CAUSE LOSSES WORTH RS202B
By Zafar Bhutta Published: February 5, 2020
ISLAMABAD: The Power Division has informed the government that running the 1,263-megawatt LNG-based power project near Trimmu Barrage on expensive imported gas, while ignoring other cheaper fuel options, would result in cumulative loss of Rs202 billion up to 2025.
Pakistan has a long-term supply contract of 500mmcfd LNG with Qatar and the first review is due in 2025. At present, Pakistan has LNG-based power plants which have remained closed for most of the time due to expensive LNG imports. The deal was materialised during the tenure of the previous government of Pakistan Muslim League-Nawaz (PML-N).
According to an analysis conducted by the Power Division, the running of RLNG power plants on 66% must-run scenario had become uneconomical due to the long-term gas contracts for RLNG supply which do not have the price flexibility and are making these RLNG power plants rank lower in the merit order.
The 1,263-megawatt LNG-based power project near Trimmu Barrage is being set up by the Punjab government which requires 119mmcfd as 66% take or pay condition of gas but this plant will also fall out of the merit order.
“If these trends in prices as well as currently load forecast remains unchanged, the existing minimum guaranteed off-take of 66% under the Power Purchase Agreement (PPA) will not be the most economical while replacing the local coal, indigenous low mmbtu gas and imported coal and will further translate into a cumulative loss of Rs202 billion up to 2025,” the Power Division said in a report submitted to the government. It said that in case of this plant the diversion may not be possible which would limit the price mitigation factor.
The Power Division further said that diversion of around Rs119mmcfd take or pay RLNG to the power sector at the existing price of Rs1700mmcfd translates into an increase of around Rs88 per mmbtu price on an annual basis while the same diversion in the gas sector will result in the increase of Rs55 per mmbtu on an annual basis at the existing pool price of Rs738 per mmbtu.
Further in terms of economic value of heating unit, Take-or-Pay (TOP) volume of 119mmcfd of gas for the end consumers in the gas sector will have a loss of around 13.8%. In addition, on account of benchmark losses profiles and actual recoveries in the electricity and gas sector, diversion of 119mmcfd in electricity sector will add around Rs27.398 billion to the circular debt on an annual basis while the same volume will add around Rs5.9 billion in the gas sector on an annual basis.
The Economic Coordination Committee (ECC) has already decided that the 66% guaranteed take-off of LNG in case of two plants of National Power Parks Management Company Limited (NPPMCL) being privatised will continue till year 2025 as their contracts have already been signed and have back to back cover throughout the supply chain but beyond year 2025 these conditions will be revisited.
For instant cases where Gas Sales Agreement (GSA) and PPA are to be signed, agreeing to a 66% must off-take will not be prudent, the Power Division said. It added that as a mitigation factor for this gas volume, discussions were held with the K-Electric and it was agreed that the utility will build a pipeline for supply of RLNG to its power plants at its own cost consuming 150mmcfd of gas. Any actual downward deviation of K-Electric from the firm allocation of 54,750mmcfd in the actual shall be subject to net proceed differential (NPD), which is to be borne by K-Electric.
For such arrangements necessary contractual arrangement shall be made to give effect to the said transaction. It is worth mentioning that to attain financial close of this project which is owned by government of Punjab, GSA can be signed on take or pay basis and the stakeholders are in agreement in this arrangement including the lenders, Sui Northern Gas Pipelines Limited (SNGPL) and Central Power Purchasing Agency (CPPA-G).
The Power Division had submitted a response to the government that the contract may be signed on a take or pay basis or if ‘take or pay’ basis is required to be part of the contract, the guaranteed 66% off-take of gas condition should not be part of the GSA, PPA.
It had also stated that the Trimmu Power Plant will be utilised within the existing guaranteed 66% allocation of the three LNG based power plants; Balloki, Haveli Bahadur Shah, and Bhikki till 2025 without impact on the capacity payment and K-Electric plant diversion be made part of this package.
After 2025, the GSA of Trimmu Power Plant with SNGPL shall be formulated in accordance with RLNG requirements of power sector discovered through the annual production plan.
Published in The Express Tribune, February 5th, 2020.
https://tribune.com.pk/story/2150319/2-1263mw-lng-plant-cause-losses-worth-rs202b/
GOVERNMENT WORKING ON NEW LPG POLICY
By Zafar Bhutta Published: February 6, 2020
ISLAMABAD: The government is working on a new LPG policy through which it aims to slash taxes on imported LPG, marketing and distribution margins while linking locally produced LPG with 90% of Saudi Aramco contract price (CP).
The Petroleum Division has further proposed that the state-owned companies must import at least 50% of yearly LPG demand deficit and develop storages.
At present, the Oil and Gas Regulatory Authority (Ogra) has been notifying LPG prices since February 2018 based on the matters that producers’ price to be determined monthly is based on Saudi Aramco contract price. The marketing distribution margin is set at Rs35,000 per ton and petroleum levy on an indigenous product is set at Rs4,669 per ton. The government charges 17% tax on the sum of these.
The LPG Pricing Committee had held a meeting on January 1, 2019, and the Petroleum Division had finalised proposals based on the committee’s recommendations.
Under Finance Act 6 2017, a target for revenue collection of Rs2 billion was given under petroleum levy on local LPG production. Accordingly, the petroleum levy of Rs4,669 per ton was imposed effective from November 1, 2017 to meet the said revenue target during the remaining eight months of the fiscal year 2017-18.
The notification of the petroleum levy was issued on November 2, 2017 with the approval of the minister for petroleum. However, according to the Law and Justice Division, the rate of petroleum levy requires the approval of the federal government.
Sources told The Express Tribune that the Petroleum Division has proposed the government to approve a rate of Rs4,669 per ton of petroleum levy on locally produced LPG with effect from November 1, 2017. It also proposed to allow producers’ price for local LPG production equal to 90% of Saudi Aramco contract price during the months of January, February and March 2020. It has recommended reducing marketing/distribution margin to Rs30,000 per ton from the exiting Rs35,000 per ton and general sales tax (GST) to zero from the existing 10% on imported LPG. It has also been proposed to reduce upfront income tax to 1% from the existing 5.5% with zero corporate tax on imported LPG.
Ogra may be directed to ensure the quality of imported LPG and effective enforcement of regulations, the Petroleum Division further said.
The Petroleum Division also presented some other proposals for the government’s approval for sustainable LPG supplies at reasonable prices in future. It recommended that state-owned companies involved in LPG supply chain like the Pakistan State Oil (PSO), Sui Southern Gas Company (SSGCL) and Pak-Arab Refinery Limited (Parco) may either develop LPG storages or explore alternate means to manage adequate stocks of LPG to meet peak demand in the country. It also recommended offering some incentives to state-owned companies to develop the storage, import and manage adequate LPG stocks.
The average production of domestic LPG was around 2,150 metric tons per day during 2019. During the winter months, LPG demand increases by around 1,000 metric tons per day compared to the rest of the months of the year. LPG is mostly used for cooking purpose in remote areas of the country where gas companies’ network is not available.
As per the existing pricing slabs of natural gas, consumption of 1.73mmbtu, equivalent to three LPG cylinders, costs only Rs265.27 to the domestic consumers whereas equivalent consumption of LPG will cost Rs5,519, as per the latest LPG price notified by Ogra for the month of January 2020. This means that for the poor living in villages, fuel was beyond their reach whereas the people living in cities were enjoying cheaper fuel for cooking purpose.
Published in The Express Tribune, February 6th, 2020.
https://tribune.com.pk/story/2150974/2-government-working-new-lpg-policy/