June 25, 2021 (MLN): In order to address the issues related to the power sector and ensure the effective provision of uninterrupted electricity supply at affordable rates, the Council of Common Interest (CCI) has approved the National Electricity Policy on June 21, 2021.
The new policy will come into effect from April 2022 for the next ten years.
The impact of this policy will be perceptible within the next five to ten years where the new generation will get electricity at low prices along with eco-friendly, a report by Darson Securities said.
Ensuring transparency in the system, primarily reliance on local fuels rather than imported fuels in the generation mix, and undertaking the financial viability to overcome the circular debt are the main objectives of this policy.
Circular debt is the major concern for the power sector which stands at Rs2.3trillion as of January 2021. Ministry for planning and cabinet committee of energy will contribute through providing special incentives to minimize the burden on circular debt, the report added.
In addition, improvising the competitive environment is also a major concern for this policy. Therefore, this policy is designed in a way that would help to accelerate the wholesale market and make it function in a competitive manner.
For this purpose, the Economic Coordination Committee (ECC) mandated to Central Power Purchasing Agency-Guaranteed (CPPA-G) to prepare a Competitive Trading Bilateral Contract Market (CTBCM) to promote fair competition in the wholesale market, Anil Kumar Rajwani, Equity Analyst at Darson Securities said.
Going into the details, generation, transmission, and distribution are the major areas of National Electricity Policy 2021.
With regards to generation, the policy aims to ensure to increase the capacity while keeping an eye on the cost factor to cater to the demand for electricity from commercial and non-commercial sectors.
According to the research conducted by Darson Securities, this policy will help to accelerate the generation capacity of the power sector and make it able to generate approximately 40,000MW electricity by the end of 2025.
The establishment of a strong and sustainable transmission network is the need of an hour to combat the issue of excessive load shedding across the country. Going by the policy, it can be said that the development of a strong transmission network will lead to smooth operation from generating stations to the distribution channel.
The report further added that the power sector requires to increase its capacity from 24,000MW to 34,000MW and for this purpose, the government has also allocated Rs1billion.
Moving on, the distribution segment is considered as the backbone of the entire power segment whereas financial viability is mainly dependent on efficient operation and timely recoveries from the customers.
To ensure the structural operation and timely recovery Provincial Governments shall provide all necessary support to the power sector entities for, inter alia, recoveries, bill collection, theft detection, and legal procedures/actions, the report said.
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