Liquidity problems: Low recovery rate hitting power sector hard

RECORDER REPORT

ISLAMAABD: The Finance Ministry has attributed low recovery of billed amount, gap between notified and actual tariff and delay in passing on fuel price adjustment to consumers as major reasons for liquidity problems in the power sector.

A top Finance Ministry official told reporters here on Friday that collections of billed amount was “very low” and was compounding liquidity problems in the power sector.

Various public sector organisations, provincial governments, and private sector owe a signification amount to distribution companies and if collections of billed amounts rise to 90 percent liquidity problems of the sector would ease.

He also termed delays in melting of ice as another reason for the latest power crisis in the country that accounts for a reduction of hydel generation from 4,000-megawatt to 2,000MW. The government is trying to cope with the situation, he added, and has released Rs7 billion to improve thermal generation in the country.

A gap of 4 rupee per unit between cost and sale price of electricity was contributing to the circular debt, he added. The government had been subsidising tariff differential to bridge the gap, he said. The official said that the average per unit cost of electricity was Rs10.65 but consumers are charged Rs6.65 per unit. He added that delay in passing on the fuel adjustment price, as well as a gap between billed amount and recovery accounts for about Rs80-90 billion that is not available to the power sector.

Secretary Finance Rana Abdul Wajid recently told the Senate’s Standing Committee that the government has provided Rs119 subsidy to the power sector during the first seven months, between July 2011 and January 2012. 

He said that the shift towards thermal power generation was negatively impacting on the country’s current account deficit as price of oil in the international market was showing a rising trend.

He said that increase in the oil price had led to a widening of the current account deficit by $2.1 billion. He also said that oil price was $105 at the time of the budget preparation but has since jumped to $130 per barrel in the international market, putting an additional burden of $2.1 billion on the current account. He said that $1.4 billion inflows were estimated on account of Coalition Support Fund in the current fiscal year’s budget but the amount was later revised downwards to $400 million. However the Secretary was not optimistic about the possibility of disbursement of $400 million CSF in the current fiscal year.

The Secretary Finance informed the committee that the National Economic Council (NEC) meeting was scheduled on May 18 for approval of the development budget and Macroeconomic Framework for the next fiscal year.