Fresh P1.5 billion subsidy for BPC

Isaac Pinielo | Tuesday February 3, 2015 15:29

 

For the 2014 financial year, government pumped P1.49 billion as a tariff subsidy into the Corporation enabling it to post a profit for the year of P114 million, being the first such since 2008. In 2013, the sole shareholder had ploughed in P871 million, up from P508 million and P454 million in the preceding years.

In addition, for 2014, government paid P450 million during the financial year as premium for the costs the BPC met in securing emergency power, down from P502.6 million in the previous year, as the higher generation at Morupule B limited the need to plug gaps.

Yesterday, Matambo said water and energy were priority areas for funding, noting that under-performance of the two sectors had weighed down economic growth in the 2014 financial year. “The continued underperformance of the water and electricity sector is of major concern, given the importance of water and power in the economy,” he said in his 2015/16 budget statement. “To address the challenges facing this sector, government continues to undertake regulatory reforms and has allocated the sector a substantial development budget in 2015/2016 financial year.”

The “substantial development budget” it later emerged during Matambo’s address, was P3.32 billion or more than a quarter of the total development budgets. Besides the tariff subsidy to the BPC, projects to benefit in the energy sector include Morupule A refurbishment at P100 million, electrification of villages at P100 million, North West Power Transmission Grid at P50 million, Rakola Power Substation at P50 million and ZIZABONA regional power project at P33 million.  A total of P150 million has also been allocated for the ongoing construction of an Oil Storage facility at Tshele Hills in Kgatleng District. However, it is the P1.5 billion tariff to the BPC that is likely to raise eyebrows when debate on the budget begins on Wednesday, as legislators have previously accused government of giving the utility a blank cheque while ignoring operational inefficiencies.

Government says allowing the BPC to charge cost-reflective tariffs would cripple the economy and alienate the less fortunate in society who are already struggling to enter mainstream economic activities through access to electricity.

However, experts say a different, specialised solution can be found. “Energy subsidies reinforce inequality because they mostly benefit upper-income groups, who are the biggest consumers of energy,” IMF First Deputy Managing Director, David Lipton said in a paper published last year. “For example, in the case of electricity subsidies, a large majority of the poor in Africa receive no benefit at all because they are not even connected to the electricity grid.”

The water sector also received a boost yesterday, with P500 million allocated for the North-South Water Carrier II, P150 million for the Kanye and Molepolole connection to the North-South Water Carrier and a total of P189 million for the Mahalapye and Palapye Water Network extension as well as Maun Water and Sanitation works.