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DAM-L Water, power and gas tariffs to go up (fwd)

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From: Right to Water <right-to-water@iatp.org>
To: dianne@sandelman.ottawa.on.ca
Subject: Water, power and gas tariffs to go up
Date: Sat, 28 Jul 2001 05:56:16 -0500
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Right to Water (right-to-water@iatp.org)    Posted: 07/28/2001  By  daima@brain.net.pk	

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Water, power and gas tariffs to go up

By Nadeem Malik

ISLAMABAD: The government is likely to increase electricity, gas and water
tariffs to rescue the state-owned utilities from financial straits.

According to a report of the Ministry of Finance, the financial difficulties
of the Water and Power Development Authority (Wapda) and Karachi Electric
Supply Corporation (KESC) are being addressed in close consultation and
support from the World Bank and Asian Development Bank.

This programme is also part of the measures agreed with the International
Monetary Fund (IMF) for the fiscal year 2001-02. The overall focus of the
reform strategy remains on price adjustments rather than reducing the line
losses, corruption and inefficiencies of these organisations.

Higher tariff structure of public utilities is already serving as a
disincentive for the industrial sector due to rising input costs. This
policy is also detrimental to the interests of the common man, who is
already hard-pressed to make both ends meet.

However, programme structures of the international financial institutions
(IFIs) mainly rely on pricing reforms, irrespective of the fact that it
serves the national interest or not. The official reports suggest that Wapda
will adjust electricity and water rates in the coming months in such a way
as to gradually phase out the GST subsidy on electricity.

Together with the streamlining of its expenditure, corporatisation and
unbundling of local distribution companies, this should allow Wapda to
remain current in its debt service payments and obligations towards the
independent power producers (IPPs) and other suppliers.

However, the government will keep Wapda's situation under close review, as
its financial position remains vulnerable to furnace fuel price increases in
international markets and shortfalls in rain that would force Wapda to
substitute expensive thermal power production for hydro-power, says the

The report adds that the financial position of KESC remains of even greater
concern. A financial and technical restructuring operation supported by the
ADB aims to turn around KESC's finances and prepare it for privatisation by
mid-2002. While KESC will need substantial exceptional financing for its
projected cash shortfalls, borrowing from the banking system has certain

It has been decided that the federal government will continue to ensure that
agreed federal and provincial agencies remain current on their electricity
bills, through deduction at source from the provincial share in tax

For all other agencies, Wapda and KESC will apply normal commercial practice
of switching off supply if bills are not settled. The overall thrust of all
the public utilities will be to move towards market-based pricing.

Diesel prices would be deregulated in September 2001, and residual freight
pool for petroleum products would be fully dismantled by 2003. Gas prices
would be adjusted biannually to establish parity with oil prices. Next
tariff revision would be done in October 2001.

According to official estimates, last 14.4 per cent upward revision in gas
rates reduced consumer subsidies from 32 per cent to 24 per cent. The
remaining cross-subsidies, particularly for low-income groups, would be
phased out in the same fashion.

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Phone: 92-61-222609

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