Subsidy burden put on power distribution companies

Previous PML-N govt gave subsidy of Rs3 per unit to industrial consumers


Zafar Bhutta April 06, 2019
Previous PML-N govt gave subsidy of Rs3 per unit to industrial consumers. PHOTO: FILE

ISLAMABAD: The Pakistan Tehreek-e-Insaf (PTI) government has shifted the burden of Rs3-per-unit subsidy being given to industrial consumers to power distribution companies, including K-Electric.

The previous Pakistan Muslim League-Nawaz (PML-N) government had announced this subsidy for the industrial sector. Following the recent development, the government will not give money through budgetary support.

The Finance Division has issued a notification informing distribution companies that any claim under the Industrial Support Package beyond June 30, 2017 would no longer be entertained. This means that the Rs3 per kilowatt-hour (kWh) subsidy being provided to industrial consumers will continue but the impact will no longer be borne by the Finance Division. The memorandum issued on March 21, 2019 states that effective June 30, 2017, the power distribution companies will now be expected to bear the impact of the subsidy and offset this through efficiency gains.

Work on splitting power companies under way

The Power Division and distribution companies have been directed to reduce ongoing losses and ensure fresh recoveries to the tune of Rs60 billion for the current fiscal year. In addition to this, the distribution companies have also been directed to ensure past recoveries to the tune of Rs80 billion.

The decision, while supporting the industrial sector, is alarming for the distribution companies, which are already facing a severe cash crunch because of the circular debt. Despite multiple efforts by various governments, the circular debt has proved to be a mammoth challenge.

K-Electric has also been conveyed to implement this decision. In Karachi, which is home to the largest number of industrial concerns in the country, the receivables of K-Electric have soared to almost Rs160 billion. Not only is this making it difficult for the power utility to keep supplying industries with uninterrupted electricity, but it has also created hurdles in the way of a number of projects, which were essential to meet growing demand.

K-Electric's receivables have surged to Rs158.8 billion from different provincial and federal organisations, including KWSB, which owes Rs31.9 billion.

According to the utility, its receivables are nearly twice its payables, which total Rs82.2 billion. Of this, Rs13.7 billion is actual principal payment due to be paid to SSGC for gas supply, while the remaining dues relate to the NTDC and other federal and provincial entities. 

Published in The Express Tribune, April 6th, 2019.

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