Power sector subsidies, payments to IPPs/GPPs: Rs516bn may be set aside as provisional IBCs

ISLAMABAD: The government is likely to earmark Rs 516 billion for the power sector subsidies and payment to IPPs/GPPs in FY 2022-23 as provisional Indicative Budget Ceilings (IBCs) as compared to revised allocations of Rs 869 billion in FY 2021-22, indicating a reduction of 41 per cent in allocations, well-informed sources told Business Recorder.

However, if the proposed allocation of Rs 516 billion is compared to the Rs 330 billion earmarked for FY 2021-22, the increase is estimated to be about 56 per cent. If payments of Rs 215 billion to IPPs/GPPs in FY 2022-23 are excluded from earmarked subsides, the proposed allocation will be Rs 301 billion.

The sources said Finance Division will earmark Rs 175 billion as Inter-Discos Tariff Differential Subsidy (TDS) for FY 2022-23 as compared to Rs 184 billion in FY 2021-22, which is 9 per cent less. However, if the proposed allocation of Rs 175 is compared with revised allocation of Rs 234 billion, it will be over 30 per cent less. The revised allocation of Rs 234 billion also includes Rs 50 billion for advance subsidies for next fiscal year approved by the ECC two weeks ago.

The indicative budget ceiling for Fata subsidy is likely to be Rs 20 billion in FY 2022-23 as compared to Rs 18 billion.

Rs5/unit relief on electricity bills may end next month

Finance Division has not earmarked any amount for Industrial Support Package 1 and 2 for KE in FY 2022-23 despite the fact that Rs 37 billion were allocated for this purpose for FY 2021-22 which was revised down to Rs30 billion.

For agricultural tubewells in Balochistan, an amount of Rs 7 billion is being earmarked in FY 2022-23 which is equal to allocation of Rs 7 billion for current fiscal year. The allocation for AJ&K TDS, an amount of Rs 3 billion will be earmarked for FY 2022-23 as compared to Rs 2 billion for FY 2021-22.

The Finance Division has earmarked Rs 76 billion as TDS for Karachi Electric for FY 2022-23 as compared to Rs 56 billion allocated for FY 2021-22, with an increase of 36 per cent. However, the government revised down original allocation of Rs 56 billion to Rs 40 billion for FY 2021-22.

The government has allocated Rs 20 billion for export oriented industry for FY 2022-23 as compared to Rs 20 billion in FY 2021-22.

The Finance Division has also agreed to provisionally increase allocation for payment to IPPs/GPPs to Rs 180 billion in FY 2022-23 from Rs 136 billion in FY 2021-22. However, allocation for PHL loan as equity will be slashed to Rs 35,000 billion in FY 2022-23 from Rs 130 billion in FY 2021-22.

The government also paid Rs 434 billion to IPPs/GPPs in revised budget of FY 2021-22, which includes Rs 331 billion to IPPs, Rs 73 billion for GPPs and Rs 50 billion for CPEC IPPs.

According to Finance Division, funds will be released in line with provision of Public Financial Management (PFM) Act, 2019, the Budget release strategy of Budget Wing and with prior concurrence of Corporate Finance (CF) Wing of Finance Division.

Power Division has been asked to follow the instructions already issued on May 9, 2022 by the Finance Division’s budget wing.

The Power Division has further been asked to prepare the Budget Orders (BOs) New Items Statements (NISs) in accordance with the above stated Provisional Indicative Revised Estimates for FY22 and provisional IBC for FY23.

Copyright Business Recorder, 2022