Power tariff increase owed to highest ever circular debt: Miftah Ismail

Former finance minister issues 'explainer'; demands govt withdraw decision to increase per unit price of electricity

Our Correspondent January 24, 2021


Former finance minister Miftah Ismail said on Sunday that the incumbent government's decision to raise the per unit electricity price by Rs1.95 came in light of the circular debt being at its highest in the country's history, saying the masses will be deprived of another Rs200billion because of the decision.

"We had left the circular debt at Rs1,036 billion, which included power losses and bank's loan both, and now it has crossed the mark of Rs2,400 billion." Ismail said.

The former Pakistan Muslim League-Nawaz's (PML-N) comments, made in a video message, came in response to the recent raise in power tariff by the ruling Pakistan Tehreek-e-Insaf (PTI) government.

"[Prime Minister] Imran Khan increased the power prices as soon as he assumed power in order to stop the circular debt from rising," he noted, adding, "the premier had claimed bringing the circular debt to zero."

Also read: PM Imran defends power tariff hike

Ismail said, "circular debt is rising by Rs50 billion to Rs60 billion every month, with an annual hike of more than Rs600 billion." He further stated that the major reason behind the rise in the debt is the losses in the power supply and distribution.

Losses, recoveries

"Likewise, bill recoveries stand at 88 per cent as compared to the average 93 per cent during the Pakistan Muslim League-Nawaz (PML-N) government," Ismail added.

According to the ex-finance minister, the PM Imran-led government produced expensive electricity through expensive power plants and used diesel and furnace oil instead of LNG, the import of which was delayed.

"Importing the furnace oil only benefits a few people and lobbies, but it causes harm to the masses," he said as he pleaded the government to "please stop this injustice with the people."

Current capacity

On the one hand, the government is establishing new power plants while, on the other, it says it has the capacity to generate additional electricity. "If it has the capacity for additional power, why is it setting up new power plants?" the former minister questioned.

Also read: PM agrees to increase power tariffs

"Also, why are they not granting the requests for new connections totalling 3,000 megawatts if they have surplus power." He further said that the production of electricity is low because of the deteriorated economy.

Gas supply to industries

Miftah said that the government's decision to discontinue gas to power-producing industries is strange. "It will put the textile and other industries into trouble." He said it is totally wrong to make the people and the industries pay the price of the delayed and expensive import of gas and own [the government's] ineligibility."

"For the past two-and-a-half years, the government has done nothing but put blame on the PML-N government," Miftah said, adding that its "mala fide intention is clear and visible."

The former finance minister demanded that the government withdraw its increase in electricity tariff, bring reforms, overcome power supply losses, and improve bill recoveries. "It must implement Nepra's merit order and refrain from cutting the supply of gas to industries.

The recent hike

On January 21, the government announced Rs1.95 hike in the power tariff, which it blamed on the agreements made by the previous government with “bad-intentions and corrupt practices”.

At a joint press conference with Planning Minister Asad Umar and Special Assistant to Prime Minister on Power Tabish Gauhar, Energy Minister Omer Ayub Khan said the government had paid Rs473 billion subsidy to the power sector last year despite economic crunch and the Covid-19 pandemic.

The minister said that that previous government intentionally installed power plants based on imported fuel, causing a flight of $6.5 billion foreign exchange. “The agreements signed by the previous government in the power sector were based on bad intentions and corrupt practices,” he told reporters.


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