Tariff, circular debt plans: govt expects ‘further progress’ in coming week

The interim government on Sunday dismissed what it called “negative perception” regarding the circular debt reduction and tariff rationalisation plans, saying “productive deliberations” have been made with the International Monetary Fund (IMF).

As per a post on X from the Petroleum Division, Ministry of Energy, the government has shared additional information regarding the plans with the IMF and expects further progress in the coming week.

“This is to dispel the negative perception being created regarding Circular Debt Reduction and Tariff Rationalization Plans. There have been productive deliberations with IMF after which additional information has been shared. Further progress on these plans is expected in the coming week,” it wrote.

Some reports had suggested that the IMF was not on-board regarding the circular debt reduction plan.

Business Recorder reached out to IMF Resident Representative Esther Perez Ruiz, but did not receive a response.

Last week, Business Recorder reported that the caretaker government’s team had formally interacted with the IMF through a video call to seek the latter’s support for tariff rationalisation and circular debt reduction plans.

Both plans have been developed by two teams dedicated by caretaker Minister for Power and Petroleum, Muhammad Ali, who intends to get IMF and federal cabinet nod, prior to end of the caretakers’ mandate.

The sources said then that the IMF sought some clarification from the caretaker government’s team, comprising Ministries of Finance and Energy, which would be responded in a day or two so that things could become more clear prior to next round.

Later, reports indicated that the IMF had not given its consent to the proposals.

Nepra too concerned about rising tariff?

According to the proposed rationalisation plan, tariff for the industry will be slashed between Cents 8.5-11.75/kWh from cents 14 per unit through subsidy neutral proposal. However, protected categories of consumers will be further loaded from Rs50 to Rs450 per month fixed charges to minimise cross subsidy.

Likewise, if the plans are approved, energy sector circular debt stock of Rs1,268 billion will be settled using funding from the government of Pakistan.