Plans are moving ahead to transform the Water and Power Distribution Authority (WAPDA) into a profit-making utility by the end of October. Eight public limited companies will be formed for the Area Electricity Boards (AEBs), while one for the thermal plants and another for the transmission network will also be established (MEED 20:3:98).

A new company to be called Pakistan Electric Power Company is being set up to co-ordinate the operations of the public companies. The move follows a 12 per cent increase in electricity tariffs after months of negotiations with the IMF. 'The restructuring will be completed by 31 October 1998 limiting WAPDA's role to the development of hydel power resources,' chairman Shamsul Mulk said on 15 March. 'The main objective is to improve efficiency. An improvement in the service provided to the consumer is possible only by decentralising the system.'

Over the years, WAPDA has accumulated huge losses due to theft and mismanagement. Its current deficit is estimated at $477 million. In 1996/97 alone, the authority reported a deficit of $173 million after recording a surplus of $404 million the previous year. The deficit is attributed mainly to payment of a huge annual bill, about $795 million, to independent power producers (IPPs) which is expected to rise to $1,360 million in 1997/98.

IPPs are supplying power to WAPDA for $0.072 a kWh which is then sold to the consumers for $0.060 a kWh with the government having to extend a subsidy of $0.012 a kWh. No provisions are in place to revise the power agreements as sovereign guarantees have been provided to the IPPs. 'If WAPDA is not in a position to pay the IPPs, commercial prudence demands that the power rates should be reviewed which is in the interest of both WAPDA and the IPPs, as well as the consumers,' Mulk said.

WAPDA's line losses and leakages stood at 24.3 per cent of the total generation in 1996/97 mainly due to its antiquated distribution and grid systems. According to Mulk, they can be brought down to 16 per cent. 'But this will require a heavy investment. Efforts will be made to cut down the line losses to 23 per cent during the current year. This will save the authority $34.1 million,' he said.