The ministry of finance, at last, decided to release an amount worth Rs 104 billion in order to settle the pending power subsidy claims for the current fiscal year 2016-17.
The subsidy, estimated at Rs104.4 billion, is due to be paid to Azad Jammu and Kashmir (AJK), K-Electric, industrial consumers and Federally Administered Tribal Areas (FATA).
In the budget for FY17, the government had allocated Rs 118 billion as subsidy for power consumers, which was 0.3pc of the Gross Domestic Product (GDP). This is remarkably lower than the Rs 676 billion, or 2.4pc of GDP, earmarked for subsidy in FY 2012-13.
The cash crunch has been the result of the growing circular debt as energy companies fail to clear outstanding bills owed to one another.
The increase in load-shedding runs contrary to the government’s repeated claims of eliminating power outages by 2018. The ruling PML-N has also come in for a lot of flak from the opposition, as the opposition has launched an anti-government campaign.
Among the energy companies, Pakistan State Oil (PSO) has huge receivables in its books, amounting to Rs 300 billion. The oil marketing giant has already cautioned the government about an impending disruption in oil supplies if the dues are not swiftly cleared.
The ministry of petroleum and natural resources has pinned the blame on the ministry of water and power because the power distribution companies could not pay dues owed to electricity producers, which in non-payment of PSO’s bills.
On its part, the power ministry has put the onus on the finance ministry, saying that the latter has not released the subsidy allocated in the budget. The subsidy payments are still awaited, though the financial year is going to end on June 30.
In a meeting held on April 18, the prime minister was informed that the ministry of water and power had approached the finance division for the release of the subsidy earmarked for power sector. The division agreed, in principle, to dole out the money.
According to the finance ministry, the circular debt stood at Rs 329 billion on April 5, 2017. The power ministry has held the National Electric Power Regulatory Authority (NEPRA) responsible for the swelling circular debt.
Ministry officials argue that because of the difference between Nepra’s assumptions and actual bill recoveries and line losses of the distribution companies, the circular debt had surged from Rs 320 billion in October 2014, to Rs 374 billion in December, 2016.
