After being informed that the power subsidy will remain around Rs 300 billion during next fiscal year considering estimated Rs 350 billion for the current fiscal year if the required administrative measures were not taken immediately, the government has directed the Ministry of Water and Power (MWP) to recalculate the subsidy keeping in mind various tariff scenarios to finalize their estimate for the next fiscal year. An official source said that the government was informed that if it did not firm up its political will by passing on the complete power tariff differential to the consumers then the subsidy would be around Rs 300 billion in the next fiscal year.
To reduce the subsidy, MWP proposed that the gas supply of 350 mmcfd given to the CNG sector should be immediately diverted to the power sector, which was getting only 175 mmcfd as compared to energy summit approved limit of 207 mmcfd. If the total demand of 900 mmcfd for the power sector was met, MWP assured there would be drastic decrease in load shedding and power subsidy and circular debt would be zero.
However, the source said the government lacked the political will to annoy the powerful lobby of influential business groups who were getting uninterrupted gas supply for their captive power plants which were generating power at one third cost, as compared to the current determined tariff.
The source said the Central Power Purchasing Agency (CPPA) is tasked to calculate power subsidy under various tariff scenarios. The final figure is likely to be finalized by May 29 after approval from the Ministry of Finance. However, he said the power subsidy could not be decreased from the current fiscal year level, if the government did not firm up its resolve to bring in immediately the identified administrative reforms.
The government’s lethargy in inducting professional management at the public sector entities like CPPA, NTDC, DISCOs and GENCOs were also hindering the reform process, as the incumbent management were subtly involved in subverting the generation and distribution. The government had announced in October last year to complete the hiring process for professional management within a month to expedite the reform process.
He said that the historic low water inflows in rivers which have declined from 140,000 cusecs in mid May last year to 45,000 cusecs this year, was further compounding the problem, as more power was being generated from expensive furnace oil power plants.
The government has also failed to implement the recommendations of the energy summit as markets were not closing at 8 pm. The single step will result in saving of 1400 MW during peak hour load. The demand side management is needed in the short term to counter the long black outs at night.
