Industrial support package runs out
MUSHTAQ GHUMMAN
ISLAMABAD: The federal government has discontinued Industrial Support Package (ISP) of Rs 3 per unit during off peak hours (20 hours in total) effective from July 1, 2019.
This decision was taken by the Economic Coordination Committee (ECC) of the Cabinet in its meeting held on June 26, 2019 with PM’s Finance Advisor, Dr Abdul Hafeez Shaikh in the chair.
Meanwhile, the government has also increased power tariff for domestic consumers using above 700 units per month, commercial of higher slabs and industrial consumers by Rs 180 per unit from July 1, 2019. The government claimed that it has earmarked Rs 217 billion for electricity subsidy in the budget 2019-20.
The sources said on June 19, 2019 the following proposals of Power Division on cash and non-cash settlement for power sector, Rs 3/Kwh subsidy announced by the Prime Minister for the industrial sector and AJK dues were considered: (i) ISP claims of Discos payable by MoF as on May 29 of Rs 87.26 billion be allowed as non-cash adjustment against the federal government outstanding re-lent loan receivable as on June 30, 2018 from Chashma Nuclear Power Plant (Pakistan Atomic Energy Commission, (PAEC), Wapda and NTDC against the payable of power sector to same entities through book adjustment at the level CPPA. The ISP claims of KE will be treated separately through cash settlement; (ii) on account of AJ&K receivables of three Discos i.e. Rs 119.05 billion (Iesco) Rs 80.58 billion + Gepco Rs 15.08 billion + Pesco Rs 23.39 billion) Rs 18.6 billion are on account of taxes. From balance of Rs 100.5 billion (Rs 119.05-18.6 billion) Rs 27 billion will be adjusted as cash @ Rs 9 billion per year, Rs 16 billion as non-cash against the re-lent loans for the Discos and the balance of Rs 57.5 billion as equity in the Discos in ratio equivalent to the percentage shares of their outstanding liabilities against CPPA-G. Claims of AJ&K subsidy beyond June 30, 2019 will be dealt with in accordance with agreement of GoAJK; and (iii) for future, ISP of Rs 3 per unit for industrial consumers may continue if its financial implication of Rs 80 billion/ year is budgeted or it may be discontinued.
The ECC approved the proposal with the following modification: (i) the period of adjustment of ISP claims will be up to June 30, 2019 instead of May 31, 2019;(ii) adjustment of payable ISP and AJK subsidy will be made through memorandum of authorization by Finance Division; and (iii) the ISP claims of K-Electric will be treated separately .
The ECC also directed Power Division to consult Ministry of Industries and Production with respect to continuation of ISP in future.
Power Division apprised that the proposal for non-cash settlement of ISP was later discussed with stakeholders including PAEC and NTDC. PAEC showed its inability to cater for Rs 57.11 billion proposed non-cash adjustments against the relent loans. After discussion, an agreement was reached for adjustment to the tune of Rs 23 billion. The re-lent loan till May 30, 2018 against Wapda, NTDC and PAEC stood at Rs 144.85 billion. PAEC has proposed an adjustment of Rs 23, instead of approved Rs 54.19 billion. Owing to this adjustment, share of NTDC has been readjusted to Rs 37.77 billion instead of the approved Rs 11.78 billion, whereas Wapda’s share remains as was approved. Total adjustment, therefore comes out to be Rs 77.01 billion instead of approved Rs 87.26 billion. Further, as per decision of ECC of June 19, 2019, adjustment period of ISP claims up to June 30, 2019 will not be possible as claims till May 30, 2019 have been received and claims for June 2019 will be received in July 2019.
Regarding ISP claims of K-Electric, a mechanism is being developed for cash settlement. The mechanism will be shared with Ministry of Finance before presenting before the ECC. For future treatment of ISP, a meeting with the Ministry of Industries and Production is being arranged.
Power Division, in its proposal to the ECC recommended that ISP claims of Discos payable by Ministry of Finance as on May 2019 be allowed as a non-cash adjustment against federal government outstanding re-lent loan receivable as on June 30, 2018 from Chashma Nuclear Power Plants, Rs 23 billion, Wapda Rs 16.24 billion and NTDC Rs 37.77 billion against payables of power sector to same entities through book adjustment at the level of CPPA. The ECC approved the proposal of Power Division.
The ECC further decided that the subsidy of Rs 3 per unit for ISP will continue to be provided to the industrial consumers on usage of electricity but only during peak hours, whereas subsidy for off peak hours’ usage will be discontinued with effect from July 1, 2019.
According to a press release issued by Power Division on July 1, 2019 Nepra has determined the periodic adjustments for 1st and 2nd quarters of FY 2018-19 and recommended to Federal Government on June 14, 2019 for notification.
The rate determined by NEPRA is Rs 1.49/unit for all categories of consumers. This will help clear the stranded costs on account of quarterly adjustment charges. GoP has ensured to limit this effect on most vulnerable categories of consumers. No increase in tariff of consumers up to 300 units (75% consumer base) – subsidy budgeted at Rs. 54 billion and only half increase (0.75 Rs/unit) in tariff of other domestic consumers (300 units and above). No increase in tariff of commercial consumers’ up to 5 kW (94% consumer base) is proposed.
The Power Division has claimed that there will be no change on 7.5 cents/unit rate of zero-rated industries and agriculture consumers will continue to get relief of 50% less per unit.
