cpec-security-through-electricity-bills

Here comes a bad news for the people of Pakistan as government has finally directed the power producers to collect huge amount from consumers in the name of CPEC Security. The amount will be collected over the course of next 20-30 years by labelling it as ‘Security Cost’.

National Electric and Power Regulatory Authority (NEPRA) has issued an order to the power producers to charge the security cost of the power projects under the China Pakistan Economic Corridor (CPEC). The power regulator has authorized producers to charge 1% cost of the 19 CPEC-related power projects worth $15.56 billion as part of their tariff.

Reminding you that the Federal Cabinet had already approved the idea through the Economic Coordination Committee on September 22, 2016 and now NEPRA has issued the latest notice. The overall security cost for CPEC rounds off to Rs. 17 billion which equates to $2.92 million (Rs. 315 million) per year.

NEPRA Order

NEPRA said in its order, “The authority has decided to allow 1% capital cost of the project reduced by $150,000/annum (subject to 3pc indexation for each year after the first year from COD (commercial operation date)) as security cost in respect of each CPEC power project in accordance with the approved payment mechanism and the same shall be treated as pass-through item”.

While the power producers and stakeholders have their reservations against the new notice – stating that the consumers should not be charged for security as they’re already paying enough taxes – however, NEPRA maintained that the provision of security is the responsibility of the state and referred to the Article 10 of the CPEC agreement, which states,

“The Pakistani party shall take the necessary measures to ensure the safety of Chinese personnel and projects”.

If you remember, in compliance with the agreement, a special division of the armed forces has already been put to work for the security of CPEC projects and personnel.

Final Impact on Consumers

NEPRA stated that the provision of security by the government would mean the spending of public money to be allocated from the budget meaning that the development budget would be cut short, therefore the power regulator ruled that, 

“Since this cost is specific to the CPEC projects, it is more appropriate to charge this cost to the respective project. These preventive security measures shall enable the smooth operation of the CPEC energy projects and shall better protect the interest of the electricity consumers”.

While talking about the impact of these projects in the consumer bills, NEPRA said that six projects would charge 1-2 paisa per unit, three projects less than a paisa per unit whereas the remaining 10 will have zero financial impact.

The government is charging Rs. 4.7 per unit already on the account of covering low recoveries, tariff equalization, special debt servicing, high losses etc. 

The CPEC Security will become another burden on the people of Pakistan who are already being charged for the name of TV Licence Fee through electricity bills.