Budget 2020-21: Rs 216 billion subsidy for power sector likely

The federal government is likely to earmark Rs 216 billion subsidy for power sector, including Karachi-Electric (KE) in federal budget 2020-21, to be announced in the second week of June, well-informed sources told Business Recorder.
The Power Division, sources said, had sought Rs 296.5 billion subsidy of which Rs 267 billion was to be earmarked for inter-Disco, Balochistan agri tube-wells and AJ&K and Rs 30 billion for KE but the Finance Division which is preparing Corona-budget for fiscal year 2020-21 with limited resources, has slashed it to Rs 216 billion. Of this, Rs 201 billion is expected to be earmarked for Pepco's entities whereas Rs 15 billion will be for K-Electric. Another source said that Power Division has sought Rs 23 billion subsidy for KE.
The government had earmarked subsidy of Rs 271.5 billion for power sector for fiscal year 2019-20. However, to pick up KE's tariff differential, an amount of Rs 59.5 billion was budgeted for 2019-20 against revised allocation of Rs 40.540 billion in 2018-19.
According to the IMF documents, the government had earmarked pre-Covid subsidy of Rs 273 billion for power sector in 2019-20. However, the revised projection is Rs 605 billion. The IMF's rapid finance instrument report states, the GoP will earmark Rs 271 billion subsidy in 2020-21.
The country's power sector which is considered a monster for the entire economy is still not under control due to less recovery of bills, theft and other losses. The government recently raised Rs 200 billion through Islamic Sukuk-II through Pakistan Stock Exchange to clear some overdue payments of energy sector entities.
The Power Division's team has been making efforts to improve the system so that the volume of inter-Disco subsidy is reduced. However, Power Division's top bosses feel that their efforts are not being recognized at the highest level including in the federal cabinet. This is evident from the fact that Power Division made utmost efforts to retain Abid Lodhi as Chief Executive Officer (CEO) Central Power Purchasing Agency Guaranteed (CPPA-G) but failed to convince a group in the Cabinet which is against the incumbent top bosses of Energy Ministry.
Likewise, Power Division wanted to retain, Zargham Eshaq Khan, Joint Secretary (Power Finance), the key man in the Ministry who was dealing with international financial institutions, Finance Division and financial issues of Discos, but Prime Minister rejected his summary for further extension.
The Power Division surrendered him to his parent department, ie, Nespak but asked him to sit at the Power Division and extend support in financial matters as technical advisor.