ISLAMABAD(National Times)- The manufacturing sector and the power division on Thursday unanimously called for the removal or reduction of the petroleum levy on furnace oil and diesel used for power generation, stressing that it was resulting in about Rs10 per unit additional impact to electricity costs.
The demand emerged during a public hearing on the Rs2.56 per unit additional monthly fuel cost adjustment (FCA) sought by power companies to recover about Rs33 billion for electricity consumed in September.
The National Electric Power Regulatory Authority (Nepra) conducted the hearing on a request by the Central Power Purchasing Agency (CPPA) to allow distribution companies to charge the additional FCA in November bills. A government official said the proposed adjustment was the highest for comparable months in recent years.
Industrial representatives Amir Shaikh, Arif Bilwani, Tanveer Bari and Rehan Javed, representing various chambers of commerce and industry, said the government was charging substantial petroleum levies — about Rs76,000 per tonne on furnace oil and Rs80 per litre on diesel — which could otherwise be reduced to lower generation costs amid the energy crisis arising from the Iran conflict.
Representatives of entities under the power division confirmed that furnace oil- and diesel-based generation accounted for 3.6 per cent of total power generation in September because of the unavailability of liquefied natural gas (LNG) and other cheaper sources.
Industrial representatives said removing the levies could reduce generation costs from around Rs62 per unit to Rs44-50 per unit.
They argued that the levy was also increasing the government’s subsidy burden, effectively shifting money from one pocket to another.
The representatives said the prime minister had previously removed certain charges to subsidise power tariffs, but the relief had since been discontinued. They also pointed out that continuation of the surplus incremental package was imposing an additional burden of around Rs11 per unit on grid consumers and demanded its immediate suspension.
Naveed Qaiser, chief financial officer of the Power Planning and Monitoring Company (PPMC), agreed that petroleum levies on diesel and furnace oil had a substantial impact on generation costs.
He said the power division had been fighting for their removal or reduction at relevant forums and urged business representatives to continue raising the issue with senior government officials.
Mr Qaiser said reducing electricity tariffs remained a government priority, particularly for industry, to improve competitiveness with regional economies.
He said these efforts had already helped reduce tariffs by around Rs10 per unit for consumers generally and up to Rs18 per unit for industry, achievements that should also be acknowledged.
CPPA’s Rehan Akhtar said the actual fuel cost in September stood at Rs10.022 per unit against the reference rate of Rs7.46, resulting in the request for an additional FCA of Rs2.56 per unit.
He said the total financial impact was estimated at Rs32.76bn, mainly because of changes in the generation fuel mix and higher costs of alternative fuels.
However, he maintained that the net increase in the FCA would not exceed Rs1.45 per unit, as the existing positive adjustment in October would expire and be replaced by the proposed Rs2.56 adjustment in November.
Nepra and industrial representatives also raised concerns over discrepancies in power generation data submitted by the CPPA and demanded greater transparency.
They questioned a previous adjustment of Rs16bn on account of LNG prices, arguing that timely reporting of those prices could have avoided a substantial portion of the proposed additional FCA.
Officials from Nepra’s Monitoring and Enforcement Division also questioned the authenticity and consistency of information supplied by government entities.
Nepra member Amina Ahmed acknowledged the concerns, saying the regulator was aware of the discrepancies but did not want to turn the proceedings into a “circus” by publicly taking up every inconsistency.
Industrial representatives also questioned coal procurement practices at the Port Qasim power plant, alleging that the producer was procuring coal through affiliated entities at prices significantly higher than those paid by other plants.
They demanded a comprehensive investigation, including by the National Accountability Bureau. Nepra assured participants that only prudent coal costs would be allowed and that the producer would have to bear the impact.
Government entities reported a 6.5pc increase in overall power demand in September, including a 6.7pc rise in industrial consumption.
Industry representatives maintained that the higher industrial consumption reflected a shift from captive power generation to the national grid rather than the impact of the incremental package.
Average fuel cost surged by almost 37.5pc year-on-year in September, mainly because expensive, heavily taxed fuels were used to compensate for reduced LNG supplies amid the regional conflict and increased reliance on imported coal.
According to CPPA data, high-speed diesel (HSD) accounted for 213 gigawatt-hours (GWh), or about 1.6pc of total grid supply, at a generation cost of Rs62.14 per unit. This compared with 80GWh generated at Rs54 per unit in August.
Furnace oil-based generation stood at 263GWh in September, down from 321GWh in August, while its generation cost declined to Rs44.86 per unit from around Rs46.
Its share of total generation remained close to 2pc.
