Executive decisions not implemented by FBR

According to a Business Recorder exclusive, around 30 billion rupees were paid by Pepco on account of general sales tax (GST) to the Federal Board of Revenue (FBR) on billed electricity bills that were not cleared by consumers. Or, in other words, the FBR collected GST on sales when the payment in lieu of the sales was not made by the end-consumers. The legal position supports the FBR's stance namely that once a sale is made and the electricity bill establishes that the sale was made, GST is to be paid by the seller, in this instance the utility (distribution company/Pepco) to the FBR. Severe liquidity constraints in the energy sector sourced to the inability of Pepco to ensure more than 70 percent payment of bills by its consumers periodically leads to non-payment to PSO for oil supplies and thus to inability of Pakistan State Oil (PSO) to pay for fuel purchases from abroad. The deferred payment facility is limited, with the Saudi government yet to take a decision in this regard in spite of Pakistan government's pleas for nearly four years. Failure to procure fuel from abroad and provide to generating companies leads to below-capacity generation which, in turn, accounts for a ratcheting up of loadshedding hours that have led to violent street protests. The government's by now typical response to deal with these protests is to direct the cash-strapped Ministry of Finance to release sufficient funds to enable the PSO to pay for critical imports. The Ministry of Finance, labouring under an unsustainable budget deficit, has, in turn, typically provided the minimum amount possible to allow fuel imports for a very limited period of time - the usual amount being 10 billion rupees. Thus without taking appropriate measures to resolve the inter-circular debt and ensure that it does not resurface, the likelihood of a resolution of the energy crisis appears to be difficult if not impossible. And a major contributor to this intractable debt is the failure to ensure payment for electricity consumed by government departments/ministries and Fata. While the inter-circular debt fluctuates between 150 and 200 billion rupees yet the decision to direct FBR to release the 30 billion rupees to Pepco for GST on bills that remain unpaid is a decision that in the context of the energy crisis makes economic sense. It is for this reason that the Energy Committee headed by the Federal Finance Minister Dr Hafeez Sheikh directed that FBR pay back to Pepco the GST collected on bills that remain unpaid. However the direction requires the issuance of a notification before it can be implemented. It is unfortunate but symptomatic of what ails this country's fragile economy that not only decisions taken at the highest level are not implemented but that one government institution is clearly at odds with another. And before one gets embroiled in the political conflict resonating from the National Assembly to the National Assembly/Senate standing committees to the Supreme Court to the army and the ISI, it is pertinent to note that FBR, Pepco and PSO are under the control of the federal government and there is no power or authority seeking to undermine the government powers in this regard. The President in a recent much talked about interview to a private TV channel stated that government-run entities may be weakened but not on the verge of collapse. This mindset must change for denial would further delay the process of reforms that are urgently required to stem the decay in these institutions as reflected by their sustained poor performance. The energy sector is considered as one of the major sectors responsible for poor performance indicators that matter the most to the man on the street namely inflation and unemployment. It is time that the government begins the process of reforms required within the sector and at the same time ensures that its decisions are implemented by departments under its direct and unambiguous control. Copyright Business Recorder, 2012