Power sector: Miftah has not made it clear which type of subsidy he intends to cut

ISLAMABAD: Finance Minister Miftah Ismail has not yet intimated the Ministry of Energy as to which type of subsidy in the power sector he intends to reduce - the budgeted subsidy or the relief package (supplementary grant) announced by the previous prime minister on 28 February, well informed sources told Business Recorder.

The government had allocated a subsidy of Rs 330 billion for the power sector in the federal budget 2021-22, of which Rs200 billion has already been released whereas Rs 130 billion is expected to be given to Power Division before June 30, 2022. In addition, during the course of the current fiscal year the government announced an additional subsidy of Rs 200 billion to clear some outstanding obligations.

A Ministry official told this scribe that the subsidy of Rs 5 per unit in the 28 February relief package to domestic consumers using up to 700 units, and non ToU consumers can be withdrawn after an understanding is reached with the IMF.

The official further contended that the government will have to increase the amount of subsidy in the next budget for lifeline consumers as an increase in base tariff, projected at Rs 5 per unit to be notified within a few weeks under Multi-Year Tariff (MYT) of Discos, will be unaffordable by the poor and vulnerable.

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The official maintained that circular debt has touched Rs2.514 trillion during the nine months of current fiscal year.

According to the official, the government has already started a three phased power subsidy reduction plan, duly approved by the government and National Electric Power Regulatory Authority.

According to the plan, the number of subsidy beneficiaries has been substantially reduced and domestic consumers across the country including those of KE using over 100 units per months would face an increased tariff under the guise of new slabs.

Copyright Business Recorder, 2022