PHOTO: EXPRESS
Power ministry seeks more subsidy to settle circular debt
By the end of February this year, the Ministry of Finance paid Rs84.3 billion in tariff differential subsidies to Pakistan Electric Power Company (Pepco) and K-Electric, Additional Secretary Budget Syed Ghazanfar Abbas told the Senate Standing Committee on Finance on Wednesday.
The payments were over 71% of the annual allocation, suggesting like the previous three years, the PML-N government would not be able to restrict the subsidies within the target approved by parliament for fiscal year 2016-17, ending June 30.
The government has suppressed power sector subsidies to meet the International Monetary Fund (IMF)’s condition of keeping them at a lower level.
Of the Rs84.3 billion, Rs73.5 billion had been paid to Pepco on account of tariff differential claims and subsidy for agriculture tube wells in Balochistan. The payments were 81% of Pepco’s annual allocation. K-Electric got Rs10.8 billion or about 40% of its annual allocation.
The reduction in energy subsidies was part of the reforms initiated under the three-year $6.6 billion IMF loan programme. The subsidies stood at Rs368 billion in 2012-13 or 2% of gross domestic product (GDP), which the government pushed down to about 0.6% of GDP at the end of previous fiscal year.
However, the issues fuelling the accumulation of circular debt have largely remained unaddressed over the past around four years, causing the resurgence of Rs385 billion worth of debt. IPPs have launched an aggressive campaign to highlight the government’s weaknesses.
In a meeting of the Cabinet Committee on Energy held this week, Prime Minister Nawaz Sharif directed the Ministry of Water and Power and the Ministry of Finance to find a way out to settle the circular debt.
After that, some media reports suggested that the government might issue long-term bonds to clear Rs340 billion worth of debt. However, the Ministry of Finance has yet to confirm the development.
In mid-2013, when the current government came to power, the country had been enduring widespread electricity outages, which have not come down markedly until now.
However, the Ministry of Water and Power has claimed a gradual reduction in power outages through improved supply and demand management and has also brought down untargeted subsidies.
Sugar and wheat subsidies
Documents of the finance ministry, which were tabled in the standing committee meeting, revealed that the government issued a Rs3.2-billion supplementary budget to provide subsidies to sugar barons and on wheat export.
For the current fiscal year, Rs1.3 billion has been earmarked for subsidising the sugar mills in inland freight on sugar exports.
After the issuance of the supplementary budget, total allocation for the sugar industry has increased to Rs2.9 billion. Of this, the government has already paid Rs1.63 billion from July through February 2016-17. It paid another Rs1.62 billion on account of wheat export subsidy.
PM says ending energy crisis is his priority
Compared to the subsidies, fund releases for power generation and distribution companies to bring about improvement in their networks remained low, according to the finance ministry documents.
Against the Rs60 billion cash development loan for power generation companies, the government paid only Rs25.6 billion to them in the first eight months.
There were no releases for the power wing of Wapda in the eight months of the current fiscal year against annual allocation of Rs14 billion.
Besides, the Ministry of Finance paid Rs24.7 billion to Pakistan Railways out of annual allocation of Rs37 billion to make up for the operational losses of the state-owned company.
Published in The Express Tribune, April 13th, 2017.
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