The Finance Ministry has reportedly released over Rs 150 billion subsidy to power sector during the first eight months of the current fiscal year, against Rs 179 billion budgeted for the entire fiscal year - an amount that does not include Rs 40 billion provided to the sector recently. An official said that the releases also included the issuance of Rs 40 billion sovereign guarantee by the Finance Ministry to ease the financial woes of distribution companies.
The official said that this did not include additional claim of Rs 33 billion by the Ministry of Water and Power for Peshawar Electric Supply Company (Pesco) on account of tariff differential for the last 22 months from July 2012 to April 2014. There was a growing feeling in the Finance Ministry that the figure might cross Rs 300 billion, the official added.
Sources in the Finance Ministry claimed that the ministry had provided an extra Rs 15 billion to the power sector, over and above the Rs 40 billion released during the recent power crisis, in anticipation of a subsidy claim. They said that on average, monthly subsidy of Rs 21 billion was being provided to the power sector with Rs 17 billion to Pakistan Electric Power Company (Pepco) and Rs 4 billion to KE. They added that it would be extremely difficult to contain the amount of subsidy below Rs 300 billion mark against the budgeted Rs 179 billion for the current fiscal year.
The sources regretted that in spite of the fact that the ministers of Water and Power, Finance and Petroleum had held numerous meetings to reform the power sector during the last two years, there had been no visible improvement and, instead, the situation had further deteriorated. The increase in tariff was also leading to a higher amount of subsidy and this was evident from the revised tariff for Pesco by Nepra, the sources said, blaming the power sector's woes and political appointments especially at the top level of distribution companies.
The sources further revealed that there was a new controversy on circular debt issue subsequent to reports that Rs 560 billion cited by the Water and Power Ministry was exaggerated to justify an increase in power tariff. They added that accurate figure of circular debt might not be possible at the moment but it was a fact that the power sector recoveries had increased and not decreased.
This, they said, was evident from the Ministry of Water and Power summary moved to the Economic Co-ordination Committee (ECC) of the Cabinet for approval of issuance of sovereign guarantee of Rs 25 billion. According to the summary, the power distribution companies are facing financial problems in payment of long outstanding power purchase dues to Central Power Purchasing Agency due to high distribution losses and low revenue collection. The power sector has hardly been able to recover Rs 65 from each billed amount of Rs 100.
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