The government is likely to retain the power sector subsidy for the next fiscal year at the current fiscal level of Rs 118 billion, out of which Rs 98 billion will be earmarked for the consumers of the state-owned distribution companies while Rs 20 billion will be kept for K-Electric consumers.
An official source told Pakistan Today that the planned targeted subsidies will be shared with the IMF team during the ongoing talks in Dubai. The power sector subsidy will be retained at the current year level as the government avoided lowering the target as it could be difficult to achieve in case of sudden increase in oil prices, he added.
During the first nine months of the current fiscal year, the government has remained within in the allocated subsidy limit. This has been made possible due to disapproval of passing on the benefit of reduction in fuel price adjustment to the consumers using less than 300 units per month. The government is likely to maintain the same practice next fiscal year, the source said.
In the budget estimates of FY 2014-15 subsidies were Rs 203.2 billion. In revised estimates of FY 2014-15 they increased to Rs 243.2 billion due to increase in subsidy for tariff differential. In budget for FY 2015-16, the allocation for subsidies to PEPCO forms the major component, which is 71.2 percent of the total allocation followed by subsidy to KESC with share of 14.5 percent. A total estimate of subsidies for budget 2015-16 is 0.5 percent of GDP. “We will maintain it at the same level next year,” the source said.
The government has kept Rs 60 billion in inter-DISCO tariff differential subsidy. This subsidy arises as the government maintains a uniform electricity tariff for the country. The power sector regulator NEPRA determines differential tariff for the DISCOs. The tariff differential subsidy is likely to remain in the same range even though the government is yet to notify the power tariff for the current financial year.
The source said the subsidy amount will further decline if NEPRA agrees with the government proposal of enhancing the limit of the line losses of DISCOs. The government is seeking an enhancement limit ranging between three to five percent to bring these companies out of red. This will also allow profitable disposing off of the state owned entities.
