Power supply: Govt refuses to bear cost of leakages, low recoveries

Expected to recover losses from electricity consumers.

ISLAMABAD:

Amid increasing criticism of a plan to recover circular debt from electricity consumers, the federal government on Monday refused to allocate about Rs300 billion in the budget to pay off the debt on account of leakages and reduced recovery of bills.

The government would only pay subsidies to cover the difference between cost of power generation and the tariff charged from consumers while for clearing circular debt on account of leakages and lower recoveries the Ministry of Water and Power would have to make extra efforts, said Finance Minister Ishaq Dar.

He was speaking at the inaugural meeting of the Senate Standing Committee on Finance and Revenue that was convened to discuss the budget for 2014-15.

Committee Chairperson Senator Nasreen Jalil of the MQM pointed out that since the government did not set aside any budget for clearing circular debt, it seemed that it wanted to recover the money from people.

The government has already begun the process of recovering circular debt from electricity consumers. In the first phase, the Ministry of Water and Power will take Rs31 billion in loans from banks to retire the debt and recover the principal amount and interest charges from the consumers through electricity bills.

The move is aimed at restricting budget deficit at a lower level. However, energy sector experts argue that the government should first record circular debt in its books before parking it in a subsidiary of the Ministry of Water and Power.

During the tenure of PPP-led government, Finance Secretary Dr Waqar Masood floated a similar proposal thrice to put the circular debt burden on the consumers but the proposal met with stiff resistance on each of the occasions.

According to officials, the recovery of debt from consumers could lead to a sharp increase in power tariffs in the next fiscal year. Outstanding loans related to circular debt stand at Rs239 billion while mark-up amounts to about Rs25 billion.

The government has issued policy guidelines to the National Electric Power Regulatory Authority (Nepra), asking the regulator to pass the impact on to consumers in a review petition filed by distribution companies, which is yet to be decided by Nepra.

Dar said in future the federal government would deduct 25% of provincial electricity dues from their share in federal taxes.

He was of the view that power supply would gradually improve after new projects came on stream. World powers did not want to see an independent and self-reliant Pakistan and because of this reason, they had so far opposed construction of Diamer Bhasha Dam, he added.

WB to approve loan today

Dar said the World Bank would today (Tuesday) approve a loan for Dasu hydropower project as out of 24 directors of the bank’s board, 23 had already given their consent.

He did not disclose the name of the lone country that was resisting the move. The bank is expected to approve $570 to $600 million for Dasu Dam.

Salaries

Dar also refused to announce any further pay raise, saying the government had linked the increase in salaries of employees with the inflation index. A 10% proposed increase was more than the prevailing inflation rate of 8.6%.

The standing committee did not endorse the increase in Gas Infrastructure Development Cess (GIDC) through finance bill, saying any such amendment should be brought separately, as the law demanded.

The government wants to increase GIDC through the finance bill and bypass the Senate where the opposition is in majority. In the case of finance bill, the Senate does not have veto powers.

Published in The Express Tribune, June 10^th, 2014.

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