THURSDAY DECEMBER 27: Rs 170 billion power subsidy for fiscal year 2013: entire allocation consumed in just five months

ISLAMABAD: The domestic power sector is learnt to have consumed the entire budgetary allocation of Rs 170 billion as subsidy for 2012-13 during the first five months of the current fiscal year. The total allocation of subsidy for power sector for the whole year on account of tariff differential was Rs 170 billion in the budget.
Of the total, Rs 120 billion was set aside for Wapda and Pepco and Rs 30 billion for Karachi Electric Supply Company (KESC). According to sources, Rs 169 billion had so far been released to the power sector. The period between December this year and February next year is very difficult in terms of power supply subsequent to the decrease in hydel generation after canal closures and low availability of water in rivers.
Heavy reliance on thermal generation would require additional subsidy for import of oil to offset the impact, the sources said. "Any further releases would hit the budget and fiscal deficit in a major way," the sources said. They said that further releases to the power sector would lead to a considerable increase in the budget deficit for the current fiscal year. The government provided an average monthly subsidy of Rs 28 billion to the power sector, which was "simply unsustainable".
Another official said that the payment of outstanding dues by provincial governments, especially Sindh, and other public sector organisations, could ease the financial problems for the power sector. Referring to the outcome of the adjustment of outstanding dues through federal adjuster, he said some minor payments had been cleared by provinces but nothing could be done about major outstanding dues against the Sindh government. He regretted that the fiscal situation of the power sector would remain a major challenges unless regular payments of electricity were not made by public sector and some serious reforms were undertaken in the power sector to minimise losses and improve recovery rates.
Subsidy for the power sector was estimated at Rs 122 billion for Wapda/Pepco and Rs 24.588 billion for Karachi Electric Supply Company (KESC) in the last fiscal year, which amounted to Rs 419 billion and Rs 45 billion, respectively, by the end of the fiscal year. Sources said in the current situation, nobody could forecast the amount of subsidy for the current fiscal year which might exceed the previous year.