ZAHEER ABBASI

ISLAMABAD: Finance Minister Ishaq Dar has reportedly conveyed to relevant Ministry that power sector can no longer be run by providing subsidies due to commitments with the International Monetary Fund (IMF) under an Extended Fund Facility.

Sources said the Finance Minister, who recently chaired the first meeting of the Committee formed by the Prime Minister on energy resource rationalization, stated that Water and Power Ministry needs to improve recoveries as power sector can not be the recipient of an unlimited subsidy. Reforms in power sectors are one of the major components of reforms programme agreed by Pakistan with the IMF under a $6.64 billion EFF programme.

The government has committed to the IMF that power sector reforms would include a time-bound plan to tackle price distortions, insufficient collections, costly and poorly targeted subsidies, governance and regulatory deficiencies, and low efficiency in energy supply and distribution. The government also agreed to limit the accumulation of payables arrears and to gradually reduce the stock, tackle losses, raise payment compliance, and improve energy efficiency and service delivery in the distribution companies (DISCOs). Power sector reforms also include that the government would place high priority on improving energy sector governance and transparency through National Electric Power Regulatory Authority (NEPRA) and institutional capacity of all energy sector PSEs to be strengthened to allow them to operate independently from the government as efficient commercial entities.

The meeting presided over by Dar reportedly decided to launch a campaign to disconnect electricity connections of defaulters and provide a list to the committee. The meeting also decided that action would be taken against those officials of distribution companies who had taken stay orders against them.

An official said the improvement in power sector especially in terms of recoveries and line losses has been far below expectations. Ministry of Water and Power has sought Rs 20 billion for power sector for Eid to ensure minimal load shedding during the festival which has reportedly been released by Finance Ministry. Poor recoveries and massive line losses in the power sector account for an increase in the Rs 220 billion budgeted power sector subsidy to Rs 293 billion by year end.

Water and Power Ministry has urged the ECC to issue policy guidelines for NEPRA to pass on Rs 45 billion through higher tariffs onto consumers on account of transmission and distribution losses for 2013-14 as well as debt servicing of Rs 239 billion loans on an actual basis. Sources in the Finance Ministry said that poor recoveries and growing line losses are the real problems of power sector. They added that nothing would work as long as honest efforts are not put in place without political consideration to improve power sector recoveries and minimize line losses.