ADB to give $300m loan for power sector reforms

Line losses have fallen from 17.9pc in June 2016 to 17.2pc in first half of 2017

Islamabad: The Asian Development Bank (ADB) on Thursday approved a fresh loan of $300m for Pakistan’s ailing power sector which is the third tranche of Sustainable Energy Sector Reforms Programme which started in April 2014. This programme consists of five tranches out of which three have been completed.

In the previous two tranches the Manila based institution had loaned $1.1b to carry out reforms in the country’s ailing power sector. The Ministry of Water and Power’s report on energy sector reforms has disclosed that recovery of bills from consumers had gone down to 92.2pc in first half of financial year 2016-17 from 94.6 pc in June 2016. Line losses saw a slight reversal as they decreased from 17.9pc to 17.2pc in 2017 although they were still way above the limits set.

As per the report, the government had given its commitment of conducting an initial public offering for Gujranwala Electric Power Company (GEPCO) by the 30th of June to the IMF, which it will fail to do. As per the agreement, the proceeds from the IPO were supposedly going to be used for paying off the circular debt, which has been choking the energy supply chain for years.

In lieu of the agreement for sub-programme-II of $400 million to be lent by the ADB in November 2015, the government had reaffirmed that the circular debt would be limited and controlled for the power sector. But the government per usual, failed to implement those promises and remains hugely dependent on these borrowings from the ADB to fill the gap of its dwindling foreign exchange reserves.

Among the key demands of the sub-programme –II signed with the ADB was to ensure the merger of Alternative Energy Development Board (AEDB) with the Private Power and Infrastructure Board (PPIB), amendments to the Nepra Act 1997 which all have been dually carried out by the government.

Last month, it had been reported that ADB could withdraw its financing of $300m in light of the proposed changes in the NEPRA Act 1997, which will curtail and reduce the powers of the regulatory authority which includes the provision of licences for transmission and distribution purposes and regulate the electricity tariff. In a letter written by the donor agencies to the Ministry of Water and Power it mentioned “Although improvements can be made in the implementation of the NEPRA Act, the independent regulator has been one of the strengths of the Pakistani power sector in attracting investors including ourselves.”

 

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