ISLAMABAD: K-Electric has sought allocation of Rs 635 billion for Tariff Differential Subsidy (TDS) in supplementary budget in FY 2022-23 and in the budget for FY 2023-24, premised on 20 percent tariff increase from next fiscal year. According to the power utility company, estimates for FY 2023 included outstanding claims of Rs 455.6 billion.
The breakup of its receivables as on June 30, 2022 shows that outstanding receivables from GoP were Rs 318.4 billion, of which Rs 66.3 billion were pending with Finance Division, Rs 2.4 billion with Finance Division-others, Rs 204.1 billion pending with Power Division for ECC approval pertaining to period July 2016 to June 2022, Rs 6 billion with Power Division-other items and Rs 45 billion net amount pending with Nepra.
The power utility company argues that after addition of subsidy estimate of Rs 137.2 billion for FY 2023, total claims to be released in FY 2023 stood at Rs 455.6 billion.
The forecast TDS claims are based on estimated units, fuel prices and generation/ power purchase mix. Consumer tariff issued by GoP on July 25, 2022 along with other currently applicable subsidies/adjustments have been considered. TDS includes impact of relief for zero rated industrial consumers amounting to Rs 7 billion based on currently notified tariffs that may increase in case of any change in tariff. Any change in assumptions will consequently impact on subsidy amounts.
The estimated subsidy for FY 2023-24 is Rs 179.4 billion of which Rs 179.1 billion is TDS whereas Rs 0.3 billion is for agricultural tube wells.
The power utility company maintains that an amount of Rs 635 billion is required to be allocated for TDS in supplementary or otherwise budget for FY 2024, of which Rs 455.6 billion is TDS up to June 30, 2023 and Rs 179.4 billion is estimated for FY 2024.
KE, in its letter to Power Division, while appreciating the government’s resolve to reduce circular debt and curtail its flow, has urged for full allocation of TDS and its timely release to ensure implementation on the intent.
The power utility company has requested the government to allocate essential funds to clear its outstanding TDC claims to ensure smooth release of claims in future years, as timely release will be critical towards ensuring sustainability of KE’s business including obligations towards key fuel suppliers, IPPs and CPPA-G, as well as its ability to make the required investments in a timely manner.
The letter says that forecast claims are based on estimated units, fuel prices and generation/ power purchase mix. A 20 percent increase in variable consumer tariff issued by GoP on July 25, 2022 effective from July 01, 2023, along with other currently applicable subsidies/adjustments have been assumed. Any change in assumptions will consequently impact on subsidy amounts.
TDS includes impact of relief for zero rated industrial consumers amounting to Rs 8 billion considering 20 percent increase in currently notified tariffs. Any change in assumptions will consequently impact subsidy amounts. The matter of industrial support package for incremental subsidy is currently sub judice and passing on the subsidy will depend upon the final decision of Sindh High Court therefore, currently the subsidy estimate does not include its impact.
Copyright Business Recorder, 2023
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