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ISLAMABAD: Federal Minister for Finance Miftah Ismail, Tuesday, while stressing the need for reforming the energy sector has said that the failure to reform the power sector will bring more serious consequences to the national economy.

Addressing a post-budget seminar here, he said that if the sector was not reformed it will ruin the national economy. He also expressed serious concerns over mounting circular debt in the energy sector, saying it has reached to Rs4,000 billion mark within the past five years which in 2013 was totally laid off by the Pakistan Muslim League (PML-N) government.

The minister said that despite the country having one of the most efficient power plants but owing to the most inefficient billing and decision-making process, the power sector is creating serious problems for the government.

He said that as a result of inefficient billing and decision-making process the energy sector-related total circular debt has reached Rs4,000 billion, of which, Rs2,500 billion power sector and Rs1,500 billion gas sector.

He said that at present, many furnace oil-based power plants are using coal as a fuel which costs $300 per ton while the consumers are paying $50 dollars and the government is supplying coal to the power plants on one year earlier contract as a result the government is forced to pay $250 subsidy for each ton of coal being consumed in a power plant. He added that for the past 20 years, coal prices remained hovering around $50 per tons but after Covid-19 it has suddenly reached $300 per ton.

The minister said that when in 2013 the PML-N came into power the total circular debt was Rs500 billion and the PML-N government laid off almost the entire circular debt excluding Rs23 billion as it was disputed. He said that in the past debt servicing, defence and Public Sector Development Program were the largest expenditures but now debt servicing and circular debt has taken over all other heads.

He said that former Pakistan Tehreek-e-Insaf (PTI)-led government during over three years rule added 79 percent to the country’s national debt including liabilities, adding that former finance minister Shaukat Tareen has admitted that the PTI government added 76 percent to the national debt.

The minister said that the NEPRA system is too complicated which a common educated person cannot understand. He said that owing to the inefficient power pricing system, at present, per unit electricity costs Rs32 unit which in reality is Rs18 per unit. He said that the government paid Rs1,600 billion on behalf of power and gas consumers, of which, Rs1,100 billion subsidy goes to power consumers rest was paid to the gas consumers.

Capacity cost per unit of power plants on coal is Rs4 per unit, and variable cost of coal is Rs30 per unit. Similarly, LNG variable cost is Rs16 per unit and capacity cost when plants were installed was Rs1.9 unit which now has jumped to Rs3 per unit.

The minister said that the government has earmarked Rs800 for the PSDP for the next year while for the ongoing financial year it is Rs550 billion.

Speaking on the occasion, State Minister Finance Dr Pasha said that the country could not deal with the current account deficit and the budget account deficit without bringing serious structural reforms.

Pakistan needs $37 billion external funding for the next year which has been committed with global lending institutions by the former government. She said that friendly countries could not financially help Pakistan just to pay in subsidies and if the country is getting some kind of financial help it is not going to work in the long run. “To become self-sufficient, structural reforms are inevitable for Pakistan”, she said and adding no one should politicise the economy.

To put the country on the path to sustainable economic growth all the people of the country have to share the burden and nobody should politicise the economy.

Copyright Business Recorder, 2022

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