Power sector has consumed the budgeted subsidy on account of tariff differential during the first eight months of the current fiscal year, it was reliably learnt. Sources said that Finance Ministry released Rs 15 billion to the power sector on Tuesday and total releases during the first eight months have reached Rs 178 billion. There is only Rs 1 billion left from the budgeted subsidy, he added.
The government had budgeted a Rs 150 billion tariff differential subsidy for Pakistan Electric Power Company (Pepco) and Rs 29 billion for K-Electric for the current fiscal year. Sources said that the consumption of entire subsidy in eight months is going to create problems for Finance with summer approaching. On average, Finance Division provides a monthly subsidy of around Rs 22 billion to the power sector - Rs 18 billion to Pepco and Rs 4 billion to KE. An official maintained that this does not include sovereign guarantees of Rs 80 billion cleared by the Economic Co-ordination Committee (ECC) of the Cabinet on the request of Ministry of Water and Power.
Minister of Water and Power has admitted that high distribution losses, low revenue collection as well as applicable tariff are principal reasons behind power sector's woes. The official added that affairs of the power sector are going to be more difficult in summer and expected increase in the loadshedding would ultimately increase political pressure on Finance Ministry to inject higher than the average monthly subsidy. He further stated that in this case, economic managers would encounter serious problems during discussions with the International Monetary Fund (IMF) on seventh review of Extended Fund Facility (EFF) expected in the first week of May 2015.
Sources close to Finance Minister said that the issue of energy sector, especially power sector, dominated the other day's meeting on public Sector Enterprises (PSEs). Dar has reportedly pointed out the problems the economic team has been facing on agreed benchmarks and urged compliance with the benchmarks agreed under different energy sector reform initiatives. Senior officials of Finance Ministry expressed dismay at the poor performance of the power sector in terms of line losses and recoveries. An official remarked that there are too many cooks in the power sector and instead of an improvement there has been deterioration with recoveries situation worsening in spite of a considerable increase in the power tariff.
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