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ISLAMABAD: The International Monetary Fund (IMF) has asked Power Division to continue tariff rebasing on time for which power Distribution Companies (Discos) have been directed to file tariff petitions for 2024-25, well-informed sources told Business Recorder.

“The IMF’s condition is timely filing of tariff petitions and timely results. We are a little late in filing of tariff petitions, which are to be implemented from July 1, 2024. As Discos file their petitions, final number of required increase will be determined. With new rebasing, decades old references will also be changed,” sources clarified.

The visiting IMF team enquired about projected increase in tariff through rebasing and the response was that since tariff petitions are not yet finalized, numbers are not firmed up, sources added. Power Division has not calculated rebasing as dispute exists on overall projections for the FY 2024-25.

IMF not onboard with energy ministry’s tariff rationalisation, circular debt management plans

The IMF team has been informed that Power Division is on target to meet all agreed objectives including the burgeoning circular debt.

“We are on target on all the agreed commitments with the Fund. The IMF’s circular debt target was Rs 385 billion till December 2023 and we were at Rs 378 billion,” said sources.

Reform actions are also on track. The IGCEP is due next month, ie, April 2024. Process for privatisation of Discos has started. Commercial code will also be notified in April 2024, sources continued.

The sources said, issue of captive power plants is mainly related to Petroleum Division, which has the authority to disconnect their gas, after which they will be forced to shift to the electricity grid.

The IMF in its press release dated 20 March 2024 requested the government to “continue with the timely implementation of power and gas tariff adjustments to keep average tariffs consistent with cost recovery while protecting the vulnerable through the existing progressive tariff structures, thus avoiding any net Circular Debt (CD) accumulation in FY24.”

The Fund also urged the restoration of the energy sector’s viability by accelerating cost reducing reforms including through improving electricity transmission and distribution, moving captive power demand to the electricity grid, strengthening distribution company governance and management, and undertaking effective anti-theft efforts.

The sources stated that the IMF team asked two questions, not part of the program, to which the Power Division supplied answers: (i) IMF enquired where the budgeted (2023-24) Rs 48 billion was to be spent. Power Division confirmed that the amount is for the CPEC IPPs as this amount was agreed in the Standby Arrangement; and (ii) IMF team queried if the Rs 7 per unit Fuel Charges Adjustment (FCA) in January 2024 were as per projection. Power Division team replied that it was due to system constraints which was clarified during the Nepra chaired public hearing last month.

The sources said had NEPRA allowed required rebasing the financial impact of FCAs and QTAs would have been considerably less than what is being passed on these days.

“If rebasing is not done as per projections by the Regulator, the impact of positive FCAs and QTAs will be negligible. This time, we are making effort to firm up tariff rebasing early as compared to past practice,” the sources maintained.

Copyright Business Recorder, 2024

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