ECC greenlights power subsidy package

The government on Wednesday approved Rs328 billion power sector subsidy package, mainly to pick the cost of electricity of the K-Electric (KE) consumers and to partially clear much-delayed dues of the China-Pakistan Economic Corridor’s power projects.

The Economic Coordination Committee (ECC) of the Cabinet approved to pick Rs250.7 billion subsidy of the KE consumers, Rs20.7 billion for the clearance of the Chinese power plants dues and another Rs56 billion for bearing the cost of electricity subsidy of the consumers of Azad Jammu and Kashmir.

Out of the Rs250.7 billion to be paid as price differential subsidy for the KE consumers, a sum of Rs76 billion will be paid during the current fiscal year in addition to around Rs35 billion non-cash settlement. The rest of the amount will be released in the next fiscal year, according to the decision.

Headed by Finance Minister Ishaq Dar, the ECC also approved an electricity surcharge of Rs1.52 per unit to be recovered from K-Electric consumers in 12 months, the Ministry of Finance said. Through surcharge, the government will recover Rs25 billion from the KE consumers.

The government is bearing the cost of Rs250.7 billion because of its decision not to increase the electricity prices for the consumers of Karachi on account of quarterly tariff adjustments. The consumers of the rest of the country have paid this price but the successive governments did not increase the prices for the KE consumers.

The National Electric Power Regulatory Authority (Nepra) had been determining these adjustments but the government did not issue the notifications and instead has now decided to bear the cost.

A finance ministry handout stated that “the ECC allowed release and utilization of available budget of Rs76 billion as payment of arrears under different heads”. A government official said that the remaining amount will be released in the next fiscal year.

The KE has also not been paying its electricity purchase dues since 2018 on the pretext that the federal government was not clearing the subsidy dues. The power distribution company has claimed Rs448 billion subsidy arrears as of September last year.

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The payments are being approved just before the end of the fiscal year and indicate that the federal budget deficit will exceed far above the level agreed with the International Monetary Fund (IMF) in February this year.

The ECC considered another summary of the Power Division regarding implementation of the revised circular debt management plan.

“The ECC after discussion authorized Power Division to utilize one-time full amount out of assignment account in relaxation of limit of using Rs4 billion per month during June 2023 for the next five months and to ensure that there will be no more payment liability to IPPs for the period July 2023 to November 2023,” according to the finance ministry.

In violation of its contractual commitments, Pakistan has not paid Rs355 billion to the Chinese power plants. After making nearly Rs21 billion payment, the country would still owe Rs334 billion to these plants. Islamabad owes Rs120 billion alone to the Huaneng Shandong Ruyi coal-based power plant.

The ECC also approved Rs56 billion under the revised Circular Debt Management Plan (CDMP) against the AJK receivables, according to the finance ministry.

The Power Division had sought this sum against claims of agriculture tubewells of Balochistan but it could not satisfy the Finance Division about the credibility of these claims. Subsequently, the money was diverted towards clearing the dues of the AJK consumers.

For the current fiscal year, the government had approved an additional Rs335 billion subsidy for the Power Division to keep the circular debt at Rs2.374 trillion levels, which was also agreed with the IMF.

However, despite this huge fresh injection, the circular debt as of end April amounted to Rs2.631 trillion – Rs257 billion higher than the level and despite massively increasing the electricity prices.

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What appears to be a glaring inefficiency of the Power Division, a sum of Rs93 billion in this fiscal year alone was added in the circular debt because of “inefficiency of the DISCOs”. Another amount of Rs204 billion was added in the circular debt due to “under recoveries” by these power distribution companies.

There has not been any accountability for the massive increase in the circular debt. There was an increase of Rs506 billion in the circular debt during the first 10 months of this fiscal and out of which Rs128 billion was cleared by making payments from the budget.

Other decisions

The Ministry of Commerce submitted a summary regarding suspension of import conditions contained related to import of timber and wood. It briefed the meeting on the concerns of the wood and timber industry. The ECC suspended the relevant import conditions till 31 October, 2023.

The ECC also approved another summary of the Ministry of Commerce regarding amendment in relevant clauses in the Import Policy Order 2022 to allow government agencies to import pharmaceutical raw material in relaxation of the import order.

It approved Rs567 million in grant for the Ministry of Federal Education for its development expenditure. Grant of Rs9.2 million was given to the Ministry of Interior for repair and maintenance of helicopters by the Pakistan Rangers while Rs6.3 billion was also given to the Directorate General of Immigration and Passports.

The Intelligence Bureau also received Rs150 million in grants for non-employees related expenditures. Similarly, Rs470 million was approved for repair and maintenance of Supreme Court of Pakistan building, Islamabad and judges residences, rest houses and  sub-offices in various cities.