PM aide seeks halt to agri-subsidy

ECC asked not to provide more funding unless dues settled by Balochistan

ISLAMABAD:

A close aide to the prime minister has proposed a halt to the provision of agricultural subsidy to Balochistan owing to a disagreement over the outstanding dues.

In a meeting of the Economic Coordination Committee (ECC) last month, the special assistant to the prime minister on finance observed that arrears had not been cleared, which was creating a “federal liability”.

It was suggested that unless the dues were settled by the government of Balochistan, more funding should not be provided to the province, rather it should be diverted to the government of Azad Jammu and Kashmir (AJK).

The federal government has refused to release Rs56 billion in agricultural subsidy for Balochistan and diverted it to AJK.

The Power Division sought ECC’s permission for tabling a summary as an additional agenda item. It briefed the economic decision-making body that the federal cabinet on February 28, 2023 had approved a revised Circular Debt Management Plan (CDMP) and allowed an advance payment of Rs335 billion under various heads including Rs58 billion in agricultural subsidy for Balochistan.

However, the Finance Division did not agree and advised the Power Division to consider availing of Rs56 billion under any other subsidy head. Following that, the Finance Division was requested to release an advance subsidy of Rs56 billion to cover AJK receivables for FY23 in order to meet the CDMP commitments, as approved by the cabinet.

The ECC considered a summary submitted by the Power Division titled “Release of Rs56 billion as approved under revised CDMP” and approved the proposal.

Advance payment for
CPEC IPPs

The Finance Division and Power Division remained at odds over the spending of Rs20.7 billion on the government-owned power plants (GPPs).

The Power Division pleaded that it should be authorised to spend the amount on GPPs but the Finance Division opposed, saying that it wanted to use the money on the independent power plants (IPPs) of the China-Pakistan Economic Corridor (CPEC).

During the ensuing discussion, the Finance Division highlighted that Rs18 billion had already been approved by the ECC as a supplementary grant in February 2023, therefore, its purpose could not be changed.

It also proposed that Rs20.726 billion may be spent on CPEC IPPs under the Pakistan Energy Revolving Account maintained at the State Bank of Pakistan, which could be drawn as an advance against future monthly installments.

In order to utilise the whole amount before June 30, 2023, the ECC could relax the monthly withdrawal limit of Rs4 billion, it said.

Power Division secretary agreed with the proposal, saying that a summary may be approved for spending funds on CPEC projects.

The ECC green-lighted the summary and decided that the amount should be treated as advance payment against future installments. It approved relaxation in the monthly withdrawal limit of Rs4 billion in an attempt to utilise the full amount before June 30, 2023.

The Power Division pointed out that considering the unprecedented accumulation of circular debt and cash flow constraints, the federal cabinet in a meeting on February 14, 2023 approved the revised CDMP for the power sector.

It encompassed a budget of Rs905 billion to manage the critical cash flow requirements and curtail the circular debt to the minimum possible level. The total amount included a budgetary allocation of Rs180 billion for payments to the IPPs.

In October last year, the ECC had approved the opening of Pakistan Energy Revolving Account at the State Bank with an allocation of Rs50 billion for fiscal year 2023.

The Central Power Purchasing Agency-Guarantee (CPPA-G) was allowed to withdraw a maximum of Rs4 billion per month and by June 2023 it was to receive Rs32 billion while Rs18 billion would remain unutilised.

The energy minister revealed that the government had paid Rs142 billion to the IPPs to curtail their outstanding dues. “We also paid an additional Rs31 billion to government-owned plants,” he said, adding that significant dues were cleared before the end of fiscal year, which helped reduce the circular debt.

Published in The Express Tribune, July 7^th, 2023.

Like Business on Facebook, follow @TribuneBiz on Twitter to stay informed and join in the conversation.