ISLAMABAD: Power Division has reportedly expressed its inability to finalise Circular Debt Management Plan (CDMP) without approval on increasing of base tariff by Rs 1.39 per unit, well informed sources told Business Recorder.
The country’s circular debt reached Rs2.234 trillion as of July 21 - from Rs2.208 billion of July 20. However, another disturbing fact is that recovery has declined in FY 2020-21 as compared FY 2019-20. The government has to share its CDMP2021- 22 with International Monetary Fund (IMF) and the lead entity in the sector, World Bank, and Asian Development Bank (ADB) for disbursement of $ 2.8 billion, of which the share of IMF and Wold Bank would be $ 1 billion each whereas ADB will give $ 800 million.
Pakistan and IMF are about to start the sixth review talks on October 4, 2021, which if successful will set the path for disbursement of $ 750 million SDRs.
According to sources, the issue of circular debt’s target for 2022 was on the agenda of Cabinet Committee on Energy (CCoE) in its meeting held on September 17, 2021, but it did not come under discussion due to prior interaction between Secretary Power, Ali Raza Bhutta and Minister for Planning, Development and Special Initiatives/Chairman CCoE, Asad Umar.
The sources said, a consensus has been evolved that Minister for Energy, Hammad Azhar, Minister for Planning, Asad Umar will hold a meeting with Finance Minister Shaukat Tarin on the issue of tariff increase.
The sources maintained that Power Division has clearly conveyed that it cannot finalise CDMP 2022 until government gives its approval for notification of increase of 1.39 per unit in base tariff.
“Power Division is unable to finalise CDMP until Finance Ministry shares its thinking with respect to notification of Rs 1.39 per unit increase in base tariff,” the sources maintained.
Nepra had determined an increase of Rs 3.34 per unit in base tariff in January this year, of which the government notified RS 1.95 per unit in February and the remaining determined increase of Rs 1.39 per unit was to be notified on June 1, 2021.
In the previous CDMP, government had pledged to the lenders that it would increase tariff by Rs 5 per unit by 2022.
Finance Minister, Shaukat Tarin had given his assurance to World Bank in writing that the second increase in tariff will be implemented from June 1, 2021 but he failed to honour his commitment due to opposition by the Prime Minister.
Power Division had worked out a subsidy of Rs 501 billion for FY 2021-22 but Finance Ministry earmarked Rs 330 billion, which implies a difference of Rs 171 billion will now become part of circular debt.
“We want clarity from the Finance Minister on tariff increase to firm up CDMP 2022 as other aspects are merely filling gaps,” said an official.
The PTI government has already increased tariff by over 40 per cent during the last three years, which has multiplied the woes of common man.
In August 2021, Rs44 billion have been added to the circular debt, of which Rs21 billion relate to unpaid subsidy, Rs10 billion unbudgeted subsidy, Rs5 billion IPPs interest charges on delayed payments, RS 3 billion PHPL mark up, Rs16billion pending generation cost, Rs 13 billion non-payment by KE, Rs 27 billion Discos losses/ inefficiency, and Rs 40 billion Discos under recoveries.
According to Power Division, unbudgeted subsidy including AJ&K & KE (Rs 46+29 billion) is around Rs 85.8 billion whereas Rs 292 billion receivable from KE as on June 2021is pending due to subsidy dispute between KE and MoF.
The PHL and IPPs stock also reflect projected adjustment/ payment through federal budget: (i) repayment of Rs 130 billion PHL debt; and (ii) the settlement of outstanding arrears of Rs 135 billion to IPPs in FY 22.