LAHORE: The financial crunch has prompted the Water and Sanitation Agency (Wasa) to urgently pursue the Punjab government’s Rs2 billion rescue package to deal with various budgetary and administrative matters.
Via the secretaries (housing and finance departments) and the chief secretary, Dawn, a report was transmitted to Chief Minister Usman Buzdar.
Wasa (Lahore) has put every effort into enhancing its financial capital. But because of the critical reasons, in the form of a bailout package amounting to Rs2,000 million (Rs2 billion), it is in desperate need of government assistance to operate the affairs of the organisation as well as to dispose of liabilities, says the overview that was transferred a few days ago.
Wasa (Lahore) is Pakistan’s second-largest water provider, serving a population of over eight million. Its operating area is more than 350 square kilometres, and major obligations include supplying its customers with drinking water and sewerage services, as well as drainage facilities in the city. It has the only outlet within the region of authority of underground water mined by approximately 600 tubewells. Similarly, in order to dispose of the city’s waste, it needs to run more than 120 disposable stations.
Wasa is facing an acute financial crisis these days, according to the summary. Wasa’s agreed budget deficit for the current financial year (2020-21) is over Rs5.504 billion. And to compensate for the shortfall, the Punjab government offered a subsidy of Rs 2.2 billion (Rs 2.200 million) per annum. The net budget deficit for the current 2020-21 financial year is thus over Rs2.879 billion, as accepted by the governing body of the LDA.
The overview also points out the key factors behind such an immense shortfall, noting that it is primarily due to the non-revision of the domestic tariff that has been kept stagnant since 2004, while the spending of the agency has tripled due to the parallel rise in energy prices, POL (petrol, oil & lubricants), wages, employee wages, etc. Unfortunately, since 2012, the subsidy (Rs2.2 billion) given to Wasa by the Punjab government in place of a frozen tariff has also been frozen at the same amount. Both the slowdown and growth in agency expenses since 2012 have not been taken into account.
The fact that the National Electric Power Regulatory Authority (Nepra) continues to adjust its tariff categories/slabs for Wasa is another reason. In 2004, the energy charges (i.e. scrap/ agricultural tariff) were Rs4.75 per unit. In addition to changing industrial tariffs, this rate kept rising steadily through the years, although the tariff tier for the department was abruptly changed from July 2018 to “A-3” (General Service Tariff) at the rate of Rs17.56 per band. This tariff, however, actually costs Rs26.46 per unit for Wasa.
“As a result of these tariff changes by Lesco, Wasa’s electricity expenditure has increased by 577% compared to 2004, while its own tariff has remained frozen since 2012,” the Organization claims in the overview.
It also cites the country’s coronavirus epidemic and the resulting lockdown enforced in Lahore by the Punjab government. During the last quarter of the financial year, 2019-20, which led to the collapse of the tax collection, resulting in a collection deficit of 15pc.
In the meantime, during Covid-19, the government declared a property tax waiver to provide relief for the residents. Therefore, during FY 2019-20, Wasa sustained another revenue loss of Rs343 million though not a single penny was collected against UIP (Urban Immovable Property) tax share during the current financial year 2020-21.
In addition to numerous obstacles, Wasa says it is making maximum efforts to boost the recovery and strengthen its financial capabilities. “Efforts have paid off and, despite remaining under the same tariff and human resources, over the past few years the average revenue collection has increased significantly (i.e. from Rs2.928 billion to Rs5.544 billion per year the overview claims. It mentions that Wasa’s cumulative liability was Rs1,092 billion by the end of 2019-2020 (i.e. Rs800 million for Lesco & Rs292 million for contractors). The debt could not be discharged due to a lack of capital, although it was projected to cross Rs2 billion by the end of the current financial year.
In addition, the responsibility against power bills alone has risen to an intolerable condition as non-payment of bills has contributed to the disconnection of Wasa facilities’ electricity connections.
In view of the above-mentioned facts and circumstances, the Chief Minister of Punjab is requested to approve a bailout package amounting to Rs2 billion as an assistance grant by way of an immediate supplementary grant to clear the liabilities and to ensure continuity until the end of June 2021 of critical water supply sewerage facilities to the people of Lahore,” the summary states.”