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ISLAMABAD: The government and International Monetary (IMF) are said to have agreed on reducing power subsidy by 45 percent to Rs 300 billion from July 2023 onwards to protect vulnerable segments from the existing subsidy of Rs 550 billion earmarked for 2022-23, well informed sources told Business Recorder.

This understanding, sources said, was reached during recent negotiations between Pakistani authorities and IMF Mission, which has left for Washington without declaring the ninth review a success.

The government has to do away with untargeted subsidies including unfunded Rs 100 billion approved for five zero-rated sectors. The government is supplying electricity to the five zero-rated sectors at Rs 19.99 per unit all-inclusive despite opposition by the Fund. Industrial Support Package (ISP) will also have to be readjusted. The IMF, sources said, came down very hard on the government’s failure to reduce losses, and improve recovery of receivables as per the agreement.

Pakistani authorities had assured IMF that recovery will be around 94 percent, but in fact it remained less than 90 percent. Transmission and Distribution losses were higher than 17 percent against the commitment of 15.83 percent.

No official announcement on IMF programme made yet

The authorities have also been quizzed for extending subsidy of Rs 281 billion to K-Electric (KE) sans budget allocation, which is increasing circular debt stock. According to Finance Minister Ishaq Dar, total cost of electricity per annum is Rs 3 trillion of which recovery is just Rs 1.8 trillion, which implies that there is a gap of Rs 1.2 trillion. The government earmarks about Rs 550 billion in budget as subsidy whereas the remaining amount goes to circular debt.

The government has assured IMF that flow of circular debt will be stopped with new policy measures aimed at bridging the gap of Rs 1 trillion and if this gap is filled with increase in tariff, the tariff would have to be raised by about Rs 10 per unit from next fiscal year.

Some officials maintain that the government is unlikely to increase tariff by over Rs 5.50 per unit including rationalization of base tariff from fiscal years 2023-24 as Rs 10 per unit would have massive negative impact on electricity consumption and would further encourage theft.

The government has also decided to impose surcharge of Rs 3.39 per unit across the board for those consuming over 300 units monthly till June 2023 to recover over Rs 76billion aimed at bringing down the flow of circular debt of Rs 2.6 trillion as per understanding with International Monetary Fund (IMF).

Copyright Business Recorder, 2023

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Aamir Latif Feb 11, 2023 04:50pm
Losses as reported seems exaggerated, many Disco's have very high losses and poor recovery, ex FATA, rural sind and certain areas in baluchistan. Still many houses refuses meters installation in homes in ex FATA area..??? GoP instead of raising tariffs and so called subsidies that GoP is unable to pay hence land in circular debt, should reduce tariffs and slabs so as people could pay easily instead of theft.. Even in karachi, kundas can be seen in thousand, is KE people blind and shy thru do not cut supplies. GoP and provinces has to unite against theft of power, but only successful if rates reduced to manageable level or even one rate for household and commercial
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KhanRA Feb 11, 2023 05:39pm
@Aamir Latif, Pakistan cannot afford subsidies, and so cannot reduce tariffs without increased efficiency (which will not happen if continues to be state-owned enterprise). End of story.
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Rashid Nazeer Feb 11, 2023 08:16pm
What IMF said to reduce / increase the number of federal ministers , ministers , musheers etc etc etc ????? And What IMF said to increase / decrease pay - perks - privileges of poor , needy , deserving grade 17 to 22 employees ????? In the light of above 2 questions , how A class IV /BPS-1 employee , without free med facility , marginal convence , just around Rs 1000 HRA , had to pay tax on everything he use n buy can raise his family with prestige ? Here question came IMF had touched every corner of governance / org in their meetings but seems blind intentionally with the people whom they are negotiating about their quantity & quality . Does IMF compared this huge cabinet of nearly default county with rest of the world or put a condition to decrease it ??? Sub Maya hai
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