MUSHTAQ GHUMMAN

ISLAMABAD: Ministry of Water and Power has reportedly sought a Rs 208 billion subsidy for power sector in financial year 2016-17 against Rs 144 billion earmarked for the outgoing fiscal year, showing an increase of 44 per cent, well informed sources told Business Recorder.

The government had earmarked Rs 118 billion in the budget of 2015-16 as Tariff Differential Subsidy (TDS) to maintain equal tariff within Distribution Companies (Discos) across Pakistan, including K-Electric. However, after inclusion of Rs 9 billion subsidy to AJ&K, Rs 10 billion to FATA and Rs 7 billion to agriculture tube-wells in Balochistan, the total amount of subsidy was Rs 144 billion.

The sources said, out of total Rs 208 billion subsidy Rs 65 billion will be collected from consumers though surcharges which have already been made part of tariff.

The government had allocated about Rs 0.1 per cent of GDP of budgetary resources to clear the stock of arrears that accrued in AJ&K, FATA and Balochistan.

According to sources, Finance Ministry has released a Rs 121 billion subsidy to the power sector so far, adding that the claims of subsidy for May and June 2016 will be submitted accordingly, hoping the amount will be around Rs 20 billion (Rs 10 billion for May and Rs 10 billion June).

Asked about the reasons behind a 44 per cent increase in subsidy for the next fiscal year, the sources clarified that with new generation injected into the system next year sale of electricity is expected to increase by 20-25 per cent.

“We have projected an increase in sale of electricity by 20-25 per cent next year that’s why the Ministry has sought an increase in amount of subsidy,” the sources added.

Replying to another question, the sources said a reduction of Rs 3 per unit in industrial tariff will also be made part of the tariff next year which will also increase the volume of subsidy.

The payables in the power sector were around Rs 350 billion in April 2016 against Rs 320 billion in October 2014.

The source said, Ministry of Water and Power in collaboration with Economic Reforms Unit (ERU) of Finance Ministry has already prepared a monitoring mechanism to track the stock and flow of payables at all levels of the energy sector, including Power Sector Holding Company Limited (PHCL).

The debt holding company, i.e., PHCL has recently got approval of Economic Coordination Committee (ECC) of the Cabinet to reschedule Rs 25 billion loan of commercial banks as the Discos are unable to pay off loans.