Islamabad: The Ministry of Power is likely to seek Rs 588 billion as subsidy to meet the price differential between the cost of electricity and recovery from the consumers.

A meeting of the National Assembly’s Standing Committee on Finance presided over by Faiz Ullah was given a briefing by the Power Division on circular debt and its financial implications for the budget, where Additional Secretary Power Division Waseem Mukhtiar said that the cost of electricity now touched Rs 16 per unit whereas the government is charging Rs 13 from the consumers. He said Rs 436 billion would be added to the circular debt in the on-going fiscal year to take the stock to Rs 2.6 trillion. He said the recent increase in power tariff by Rs 1.95 per unit slowed down the increase in circular debt, otherwise it would reach Rs 2.8 trillion. An additional subsidy of Rs 197 billion was required in the on-going financial year, whereas the Ministry of Finance allocated Rs 140 billion, he added. He said the delay in tariff increase and the non-recovery of dues from Azad Kashmir and farmers of Quetta would increase the stock of circular debt by Rs 436 billion this year.

Waseem Mukhtiar said that the line losses of the Power sector are 17.82 %, which is 4.36 higher than the prescribed limit of 13.46 allowed by Nepra. He said inefficacies of the distribution companies (DISCOs), and non-payment by the KE, adding that “each percent loss more than permitted by the Nepra contributes per annum [to the circular debt] an amount equal to Rs17 billion and DISCOs’ inefficiencies were adding Rs170 billion [to the circular debt] and Rs100 billion is non-payment by the KE.”

During this year, the independent power producers (IPPs) would get Rs 784 billion as capacity charges, and right now the government is providing subsidy of Rs 1.83 per unit subsidy, he added. He said that currently the Power Division is preparing a Circular Debt Management Plan which will be soon presented in a Cabinet meeting for the approval of the Prime Minister.

The Power Division also acknowledged that there were almost 100 % increases in electricity tariff for low-end consumers during the last two and a half years, as the tariff for those consuming up to 50 units had gone up from Rs 2 per unit to Rs 3.95 per unit, as committee members inquired from the official of the Power Division regarding the plan to control the flow of circular debt.

Hina Rabbani Khar, a member of the committee, said there was a 100 % increase in electricity tariff for life-line consumers.

The Secretary Finance, in response to members’ concern that the subsidy for the power sector was under-budgeted, stated that the subsidy of Rs 140 billion for the power sector was budgeted on the assumption of providing targeted subsides as part of reforms, but have been slightly delayed.

The Finance Ministry has acknowledged that circular debt parked in Power Holding Private Limited (PHPL) has been converted into the country’s total debt during the current fiscal year, and not at the time of preparation of the budget. The ministry said that it would increase the total debt and the debt servicing during the current fiscal year with implications on the budget deficit.

On the other agenda item, the Committee expressed its concern on the proposals received relating to provinces from Finance Division and directed that these Public Sector Development Programme (PSDP) may be forwarded to concerned ministries and Ministry of Planning, Development and Special Initiatives for their consideration. The Committee unanimously approved the Post Office Cash Certificate (Amendment) Bill, 2020 and the Post Office National Savings Certificates (Amendment) Bill, 2020 and the Government Savings Bank (Amendment) Bill, 2020.

Following the meeting, The Correspondent spoke with former Finance Minister for Punjab Dr Aisha Ghous about how the government can deal with the issue of circular debt.


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