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ISLAMABAD: Karachi Electric (KE) has urged the Finance Division to release budgeted subsidy directly to it to ensure business continuity in the coming days.

In a letter to the Finance Minister, the CEO KE has stated that the base tariff, which was at Rs 22.5 per unit in June 2021, has also been significantly increased to Rs 31 per unit at March 2022 whereas the consumer tariff stood at around Rs 19 per unit.

According to him, the increase in base tariff is due to the recent significant increase in fuel prices including RLNG as well as the non-provision of local gas to KE.

The CEO of KE argued that as a result of the strained cash flow position due to the continuous accumulation of receivables from government entities, KE’s total borrowings have reached an unsustainable level of Rs 236 billion, which includes Rs 144 billion mainly on account of working capital requirements.

The KE’s borrowing levels on June 30, 2021, were Rs184 billion including Rs 116 billion representing mainly the working capital requirements.

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

He maintained that whilst the banks have financed the historical increase in fuel prices, the exposure to KE has already reached an alarming level, adding that unfortunately the lending capacity of the majority of the banks has already been exhausted due to which KE is no longer in a position to finance the existing and incremental price hike.

CEO has sought the intervention of the Finance Minister for intervention and support to release TDS directly to KE to enable KE to keep the operations afloat.

In this regard, within the Fiscal Budget for FY 2022, Rs 57 billion was approved for KE’s TDS, out of which CPPA-G received Rs 10.5 billion during the year.

Accordingly, KE has requested the release of the budgeted allocation of Rs 46.5 billion at least Rs 25 billion to be released immediately to KE, enabling KE to manage the company’s severely constrained cash flow position.

“We request Ministry to release net TDS (TDS claim less CPPA Bill) to enable KE to continue making timely payments to SSGC, PLL, and PSO for RLNG/indigenous gas and furnace oil,” he said adding that due to the precarious situation, any delay may significantly impact the sustainability of the KE’s operations, resulting in a potential power supply crisis for Karachi, the ramifications of which would be far-reaching for the city’s residents and businesses.

Copyright Business Recorder, 2022

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