No power subsidy in next fiscal year

  • ECC approves elimination of Rs 125 billion annual subsidy for consumers using more than 300 units
  • Also approves import of additional 150,000 tonnes of fertilizer for Kharif crops

To meet one of the stringent conditions of the International Monetary Fund (IMF), the Economic Coordination Committee of the Cabinet (ECC) on Thursday approved elimination of Rs 125 billion per annum subsidy for electricity consumers.

The ECC had detailed deliberations on proposal submitted by Ministry of Water and Power on Tariff and subsidy rationalization and approved that the current notified average consumer tariff rate along with its components and surcharges would be maintained to contain the total average national tariff. The government will continue to subsidise the domestic consumers (up to 300 units) and agriculture consumers and pass on the full cost of service as determined by NEPRA.

It is important to mention that the IMF has imposed a new condition under the current programme that the Pakistani government would take measures to eliminate subsidy completely from the power sector. Subsidy is attributed as the major reason for circular debt which has ballooned again to over Rs 260 billion during the first nine months of the current financial year.

An official source said the IMF has imposed the condition as it wants the government to handover the DISCOs and GENCOs to investors during the next financial year. The investors would only come if the power sale and purchase slate was clean and transparent without any legal or financial liabilities. To bring the power sector out of circular debt, the DISCOs have already reduced the number of consumers using 300 units per month. This has been done to make companies profitable before handing over to investors.

The government has maintained the subsidy on the agriculture tubewells but it is likely to be lifted as soon as the power supply situation improves in the country. At present there is very less power supply for tubewells and it is more of a political ploy than an economic strategy, he added.

The ECC also considered the proposal submitted by Ministry of Water and Power that full benefit of all negative adjustment on account of monthly FCA(Fuel Cost adjustments) will be passed on to all consumers except those who have subsidized electricity tariff. This will ensure that the cost reduction benefits will be passed on to the consumers who are paying higher cost of electricity.

The committee also considered the proposal submitted by Ministry of Water and Power to further empower the provinces in setting up of renewable energy projects. An enabling provision in the renewable energy policy has been incorporated. The provision will allow the provinces to facilitate sponsors of renewable projects and enter into tripartite arrangements where the federal government will provide sovereign guarantee to the provincial projects on renewable energy.

The ECC approved import of additional 150,000 tons of Urea fertilizer for Kharif.

ECC, in its meeting on April 23, had allowed import of 0.1 million tons of Urea. Additional import has been allowed with a view to bridge the demand and supply gap and build up sufficient buffer stock. On the summary of the Ministry of Industries and Production the committee approved increase in amount of subsidy on sugar from Rs 3 to Rs 5 per kilogram at the Utility Stores. This step would add around another Rs 100 million to the amount of subsidy.