The government has decided to deduct, at source, Rs 10.8 billion (90 percent) tariff subsidy out of total amount allocated for Karachi Electric Supply Company (KESC) consumers in an effort to clear the outstanding dues of Pakistan Electric Power Company (Pepco).
Sources told Business Recorder on Saturday that the government had deducted Rs 5 billion tariff subsidy of KESC at source and paid it to Pepco for clearing its dues. The government had allocated Rs 12 billion tariff subsidy for KESC consumers in 2008-09 and, due to non-payment of dues by KESC to Pepco, the government has decided to deduct 90 percent tariff subsidy allocated for KESC consumers to clear the dues of Pepco.
The decision to deduct tariff subsidy of KESC at source was taken after the Water and Power Ministry had approached Finance Ministry, demanding to deduct the tariff subsidy to clear the dues of KESC. The proposal was floated during the discussions of issuing Term Finance Certificates (TFCs) to clear the circular debt committed to International Monetary Fund (IMF) by end-June 2009.
The government is still to clear Rs 70 billion circular debt by the end of June and, considering two proposals either to issue additional Term Finance Certificates (TFCs) worth Rs 70 billion to clear the circular debt by the end of June 2009 or sell non-core assets, inclusive of land of power distribution companies.
The possibility is that the government would work to issue TFCs to clear the circular debt, sources said. Sources said that despite clearing the circular debt, the power sector is not receiving oil on cash payment, and expressed fear that Pakistan State Oil (PSO) outstandings would further increase to over Rs 90 billion by the end of June 2009.