ISLAMABAD: The International Monetary Fund (IMF) has reportedly asked the Power Division to improve performance of Discos, transmission system and start implementation on Competitive Trading Bilateral Contract Market (CTBCM) to bring down electricity prices, well-informed sources in Power Division told Business Recorder.
The Fund’s first Review Mission on the 7 billion dollar Extended Fund Facility programme left Islamabad on 15 March without reaching a Staff Level Agreement prompting wide spread speculation that prior actions have been agreed.
The main challenges of power sector remain: (i) Discos under recovery (Rs 365 billion); (ii) loss above Nepra target (Rs 275 billion); and (iii) policy driven tariff differential (Rs 600 billion) and Prior Year FCA, QTA and PYA negative (Rs 106 million) w3hich implies that there is a gap of about Rs 1 trillion that indicates interest charges on IPPs have been waived in the revised pacts.
IMF benchmarks on track, progressing as per plan: PD
According to Nepra State of Industry Report 2024, the aggregate T&D losses of all DISCOs combined during FY 2023-24 have increased to 18.31% as compared to 16.84% during FY 2022-23. It is pertinent to highlight here that NEPRA’s allowed average target of T&D losses for FY 2023-24 was 11.77%. Thus, all DISCOs combined have exceeded the target by 6.54%. This breach of target contributed around Rs. 276 billion to the circular debt for FY 2023-24. This is despite the fact DISCOs have been allowed an investment amount of Rs. 163.1 billion for FY 2023-24 to improve their network.
According to sources, Power Division’s team held detailed discussion on the power sector deficiencies and measures taken so far to deal with the issues.
The Power Division has assured the Fund’s Mission that whatever will be agreed in the final agreement will be implemented in letter and spirit.
The sources said in the short-term measures, following power sector reform measures have been taken or are being taken:
(i) reduction in industrial cross subsidy;
(ii) tariff restructuring;
(iii) staggering/ abolishment of future committed power purchases;
(iv) tax restructuring/ waiver of taxes;
(v) special economic zones;
(vi) shifting of captive units to National Grid (gas prices increase + levy imposed);
(vii) shifting of water and space hearting to electricity;
(viii) net metering rationalization;
(ix) solarization of Balochistan agri-tubewells; and
(x) regional incentive package and;
(xi) creating of ISMO.
For medium to long-term (2-5 years) following initiatives are in the pipeline:
(i) removal of transmission constraints;
(ii) conversion of imported coal power plants to local coal;
(iii) diesel tubewells solarization;
(iv) target domestic subsidy through Social Protection Program;
(v) utilizing auxiliary power for mining;
(vi) private participation in Discos;
(vii) replacement of inefficient fans;
(viii) development of integrated energy plan; and
(ix) development of power information system.
The sources said, all these measures have been shared with the IMF, which suggested implementation on these measures to reduce power tariff for the consumers. The sources said the government’s tariff reduction plan was also shared with the IMF, which gave its in principle clearance and Prime Minister will announce it at the end of the current week. The projected reduction will be around Rs 8 per unit in base tariff. However, industrialists told this correspondent that they fear the reduction will be on incremental basis.
The proposed reduction in tariff is from financial savings from the revised pacts with the IPPs, GPPs and nuclear power plants.
However, reduction can be far more if burden of recovery of taxes is shifted away from directly taxing consumers.
Currently, following taxes are being recovered through consumer bills: (i) General Sales Tax (GST) 18 per cent; (ii) income tax; (iii) advance tax; (iv) further sales tax (for inactive consumers); (v) extra sales tax; (vi) retailer tax;(vii) electricity duty; and (viii) PTV fee. In addition, surcharge is also being collected from consumers to pay interest on PHL loans.
Copyright Business Recorder, 2025
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