THURSDAY MAY 02: Funds for power sector: MoF baulks at releasing Rs 10 billion

ISLAMABAD: The Finance Ministry is reluctant to release Rs 10 billion to the power sector despite a public commitment by the Adviser to the Prime Minister on Finance Dr Shahid Amjad Chaudhry. Sources said that the Finance Ministry had already released the entire budgeted tariff differential subsidy for the current fiscal year to the power sector and any additional subsidy release would have serious implications on fiscal deficit.
The subsidy to the power sector was projected at Rs 170 billion in the budget for the current fiscal year which included Rs 120 billion for Wapda and Pepco and Rs 50 billion for Karachi Electric Supply Company (KESC). The federal government has also picked up Rs 10 billion receivables from Federally Administered Tribal Areas (FATA) and Rs 4 billion tariff differential for agriculture tube wells in Balochistan.
The subsidy for the power sector was revised upward from Rs 170 billion to Rs 291 billion for the current fiscal year. Sources said that the entire subsidy has been provided to the power sector and now additional subsidy is being sought to reduce load shedding.
A committee was constituted by the caretaker Prime Minister on 5 April 2013 and Ministry of Finance, Water and Power and Petroleum were requested to submit recommendations to resolve the problem of massive load shedding. The committee submitted recommendations to the Prime Minister on April 25 this year which were announced at a joint media briefing of Ministers for Finance, Water and Power and Petroleum on April 26.
The Water and Power Minister has publicly claimed that an agreement was reached between the three ministries with respect to implementing two critical measures that would address the problem of load shedding: (i) making available 150 MMcfd Gas and (ii) releasing Rs 10 billion to the power sector in the next few days.
Sources said that the Ministry of Water and Power submitted a request to the Finance Ministry a few days ago to release Rs 10 billion which reportedly is still under consideration by the Finance Ministry officials. However the Finance Ministry has agreed to provide Rs 35 billion in May 2013 to the power sector. The reluctance of Finance Ministry to release a total of Rs 45 billion to the power sector in the current fiscal year stems from its concern that this unbudgeted release would have a major negative impact on the fiscal deficit which is already expected to be over 8 percent of the GDP in 2012-13.
On Monday, interim Prime Minister Mir Hazar Khan Khoso reconstituted the committee with Minister for Finance, Water and Power and Petroleum and directed them to resolve the problem of massive load shedding. However, an official said that the problem would only be solved if funds were provided by the Finance Ministry and gas diverted to the power sector by the Ministry of Petroleum.