ISLAMABAD: Power Division is all set to share its ‘power sector reforms plan’ with the International Monetary Fund (IMF) on Wednesday (today) including a commitment to increase about Rs 7 per unit in tariff, a mix of base tariff, QTAs and FCAs under the 7th Review Extended Fund Facility (EFF), well informed sources told Business Recorder.
Minister for Power Khurram Dastgir Khan and Additional Secretary Incharge Rashid Mehmood Langrial will present their plan and face questions from 12:30 to 13:15 pm in a virtual meeting as an IMF team will be Doha (Qatar).
The targets/ actions agreed with the IMF related to Power Division, which will be reviewed include:
Indicative Target (IT) of Performance Criteria- ceiling on power sector payment arrears indicates that the proposed performance criteria for flow of circular debt was Rs 184 billion for July-March FY 2022. The actual flow till March 2022 remained Rs 456 billion. This was not met because of, among others, pending generation cost (non-action by National Electric Power Regulatory Authority Nepra) and non-payment by K-Electric (KE).
The sources said that Power Division team will apprise the IMF team that the proposed target for the end June 2022 is Rs 166 billion.
Structural Benchmarks- the new structural benchmark included Cabinet decision on the second step of the energy subsidy reform for residential consumers by end Jan 2022 which was achieved as the Cabinet approved it in December 2021. However, the notification for application of it is under process.
Talking about action agreed in Memorandum of Economic and Financial Policies (MEFP) with the IMF, the sources said, it has been committed that settlement of Rs 311 billion payable to IPPs by CPPA-G will be made in FY 2022. Till March 2022, payment of Rs 199 billion has been made as reported in monthly Circular Debt report for March 2022. Power Division has anticipated that Rs 287 billion will be paid to IPPs, whereas the GPPs will get Rs 72 billion during CFY.
The sources maintained that annual tariff rebasing for FY 2022 had to be implemented by Feb 2022, but Nepra has not given determinations which are awaited on their part.
However, Nepra is expected to start issuing notifications of Discos with respect to re-basing of their tariffs.
The average projected increase in tariff to meet Discos’ annual revenue requirements is expected to be over Rs 3.50 per unit which will raise the base tariff. In addition, QTA’s will be increased to recover about Rs 350 billion from consumers as capacity charges for existing plants and K-2, K-3 and Karoot hydel power plant and adjustment in monthly FCAs. The adjustments on accounts of QTAs and FCAs will also raise tariff by Rs 3.50 per unit.
Notification of QTA of Paisa 57 per unit for Q1 of FY 2022 has been issued by Nepra.
Another key issue is circular debt, which is now hovering around Rs 2.5 trillion. The main reason for massive growth in flow of circular debt is non compliance of commitments to the IMF, World Bank and Asian Development Bank.
World Bank has hinted that if commitments are not honoured, growth in circular debt will be over Rs 500 billion instead of Rs 167 billion.
Sharing details of technical Memorandum of Understanding (MoU), the sources said, indicative targets for the flow of the circular debt include operation target with respect to T&D losses and under recoveries.
The sources said, cumulative flow of circular debt end March 2022 was Rs 184 billion, but actual circular debt was Rs 456 billion, whereas end June target was Rs 166 billion but projected figure is Rs 764 billion - 360 per cent higher than the target. Of this, target operational part was Rs 174 billion by end March, which remained Rs 171 billion, slightly less than the target, whereas target till end June was Rs 244 billion, which is projected to be Rs 252 billion - higher than the target. The target for Discos’ losses was Rs 54 billion till end March 2022, which registered 57 billion, Rs 3 billion over and above the target. Discos’ losses target was set at Rs 77 billion by the end of June 2022, but it is projected to be Rs 80 billion.
The target for Discos under recoveries was Rs 120 billion till the end of March 2022, which was Rs 114 billion. The target for under recoveries was set at Rs167 billion by the end of June 2022, which is projected to be Rs 172 billion.
According to the sources, Power Division will also inform the IMF that it has already proposed to the government to withdraw subsidy of Rs 5 per unit, announced by the previous government till June 2022 as it is not sustainable.
However, Former Finance Minister in his tweet said: “Khurram Dastgir has told the National Assembly that fiscal deficit has reached Rs 5.6 trillion. As per Finance Division, up to March deficit was Rs 2.6 trillion. Seem to be paying off the entire circular debt same as they did in 2013. Should PTI government have done the same to your circular debt?”
Copyright Business Recorder, 2022