ISLAMABAD: The government will have little, if any, maneuverability to reduce utility prices during the second review of the Stand By Arrangement discussions with the International Monetary Fund (IMF).
Secretary Finance in response to a question by Business Recorder said the IMF clearly wants Pakistan to reduce theft and distribution losses and improve governance to achieve full recovery of the cost of the energy sector. This constrains the government’s maneuverability to reduce utility prices, he added.
Sources in the Power Division told Business Recorder that there is no mechanism to reduce electricity prices until there is a reduction in losses to the level set by National Electric Power Regulatory Authority (NEPRA), an improvement in recovery, and addition of renewable energy projects in total installed capacity.
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According to sources, the IMF recently conveyed to the government that Pakistan’s high electricity tariffs reflect the high cost of its electricity sector, and that reducing these costs (which are higher than competitors) through renegotiated IPPs, ending captive power, addressing theft and line losses, and privatising DISCOs should be a key priority, and is the only sustainable means towards lower tariffs.
Power Division has instructed Discos to file petitions with NEPRA for annual rebasing for CFY 2024-25, which will further increase base tariff for consumers.
The federal government has to collect around Rs185 billion to achieve the quarterly (April-June 2024) target of petroleum levy (PL) against Rs869 billion budgeted for the current fiscal year.
An official of the Petroleum Division said the rate of PL and general sales tax (GST) on petroleum products would remain unchanged to achieve the budgeted target.
The government has projected Rs369.23 billion from petroleum levy in the second half (January-June 2024) of the current fiscal year. It has already collected Rs472.77 billion PL during the first six months of the fiscal year 2023-24, which is 166 per cent higher than the levy collected during the same period of last fiscal year.
The collection of the PL during the first six months (July to December) of fiscal year 2022-23 was Rs177.85 billion. The federal government budgeted Rs869 billion collection on account of PL during the fiscal year 2023-24, however, following an upward revision of PL from Rs50 per litre to Rs60 per litre on petrol and high-speed diesel, the government revised the collection target upward and committed to IMF to collect Rs918 billion under this head during the current fiscal year.
The oil marketing companies (OMCs) have witnessed a downturn of 19 per cent in sale of petroleum products month-on-month and eight per cent year-on-year in February 2024. Oil sales declined to 1.12 million tons in February 2024 compared to 1.38 million tons in January 2024 and 1.22 million tons in February 2023.
The Federal Board of Revenue (FBR) is facing an uphill task to meet the quarterly revenue collection target of Rs2,283 billion set for the third quarter (January-March) 2023-24. And has witnessed a shortfall of revenue collection of Rs33 billion and Rs9 billion in February and January 2024 respectively.
A senior FBR official told Business Recorder that FBR had fixed an ambitious target of Rs879 billion for March 2024. This target is achievable, but the real problem will start in the last quarter (April-June) 2023-24 and targets of May and June 2024 may not be met. If the target of last quarter (April-June) in 2023-24 was not met, the annual target of Rs9.415 trillion for this year may also be missed.
Copyright Business Recorder, 2024
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