The government is considering amending National Electric Power Regulatory Authority (Nepra) Act to ‘influence’ tariff determination subsequent to taking administrative control of regulators through a notification issued by the Cabinet Division.
Sources revealed to Business Recorder that the Ministry of Water and Power and Chief Minister Punjab Shahbaz Sharif were dissatisfied with Nepra on tariff determination; and Shahbaz Sharif had publicly criticised Nepra for not issuing tariff for 1320MW Sahiwal Coal Power Project.
Official documents reveal that Nepra had disallowed withholding tax on dividends as a pass through item as well in the tariff as per actual payment as well as the grossed up (increase) return on equity (ROE) to provide a 17 per cent net of tax on IRR to CET.
The notification relating to regulatory bodies was issued on 19 December 2016 and a day later, on 20 December, a meeting of the Economic Co-ordination Committee (ECC) of the Cabinet chaired by Finance Minister Muhammad Ishaq Dar directed Nepra to allow withholding tax on dividend as a pass through item or gross up the internal rate of return (IRR) as per precedent of China Pakistan Economic Corridor (CPEC) projects to China Electric Power Equipment and Technology (CET).
Nepra had also challenged the Prime Minister’s directives to include security costs for CPEC projects in power tariff and maintained that allowing additional security cost to the CPEC projects would create legal complexities and discrimination among other power projects.
The regulator, an official told Business Recorder, also advised the government against burdening consumers with interest payments for power sector loans.
Article 154 (1) of the Constitution states that: “Council shall formulate and regulate policies in relation to matters in part-II of federal legislative list and shall exercise supervision and control over related institution.” And the federal legislative list stipulates that “All regulatory authorities established under a federal law fall within the purview of federal legislative part-II.”
However the matter was on the CCI agenda in its meeting held on 16 December but there was no official acknowledgement of any discussion on the matter having taken place though reports did indicate that the prime minister had set up a committee to be headed by Minister for water and Power to look into amending the Nepra act.
An official of Ministry of Planning, Development and Reforms said the government has already made some amendments in Public Procurement Regulatory Authority rules for CPEC projects therefore there was no reason to place PPRA under Planning and Division instead of the Ministry of Finance.
Sources in the Pakistan Telecommunication Authority (PTA) and Frequency Allocation Board (FAB) told the Business Recorder that they expect no change in their working subsequent to the notification as previously the Prime Minister’s office was incharge of these two regulatory bodies and now that function would be performed by the IT Ministry. Sources added that IT Ministry is already implementing its policies in collaboration with PTA.
Sources in Ogra said that Ogra was previously working through Cabinet Division and now with the present decision of the government it will work through Ministry of Petroleum and Natural Resources.
They further stated that Ogra’s working will not be affected as there is no change in the Ogra’s Ordinance 2002 as well as its legal framework.