ISLAMABAD: According to reports, the Power Division’s top brass has been questioned by the International Monitoring Fund (IMF) Mission for a period of two days in a row regarding their failure to fulfill commitments, such as increasing tariffs, exhibiting poor sector performance, and limiting subsidies to vulnerable domestic consumers.
Sources added that the Power Division, which included Secretary Rashid Mahmood Langrial, Additional Secretaries, Joint Secretary (Power Finance), and other concerned officials, met with the visiting IMF team in a local hotel. During these meetings, the visiting Fund team asked about the performance of the power sector and the breach of commitments made during the previous review. They also asked why promises are made when there is no capacity to fulfill them.
The sources went on to say that the Fund’s primary concern was the rise in circular debt, which is currently hovering around Rs 2.55 trillion. The authorities were unable to contain it because of their poor performance in reducing losses (T&D), improving recovery, and attracting the private sector to run discos, they said.
Due to its failure to recover over Rs 1 trillion in outstanding receivables from the private and public sectors, the government anticipates adding over Rs 900 billion to its existing stock of circular debt, bringing the total stock to over Rs 3.3 trillion. The third phase of subsidy reduction’s non-implementation was also brought up. It has already been implemented in two stages by Power Division.
According to the sources, the IMF is insisting on a tariff increase of at least Rs 5 per unit, a reduction in subsidies for domestic consumers (with the exception of lifeline consumers), and the withdrawal of subsidies for the five export-oriented sectors that Finance Minister Ishaq Dar announced on October 6th.
Official records indicate that Pakistani authorities promised the IMF that recovery would be around 94%, but it remained below 90%. In comparison to the commitment of 15.83 percent, losses in transmission and distribution were greater than 17 percent.
Despite the IMF’s expectation of 45 billion units, electricity demand in the first quarter of the current fiscal year (FY22) remained low at 44 billion units.
The authorities have also been questioned for providing K-Electric with a subsidy of Rs 281 billion without a budget allocation, which is adding to the stock of circular debt.
The IMF has been assured that the rupee-to-dollar exchange rate will remain around 232, which is still high.
