Inflated electricity bills: PM’s 48-hour deadline to announce relief expires as IMF nod awaited

People protest against the hikes in fuel prices and electricity billings, in Karachi, Pakistan, August 18, 2023. — Reuters
People protest against the hikes in fuel prices and electricity billings, in Karachi, Pakistan, August 18, 2023. — Reuters
  • IMF giving very tough time to Pakistani negotiators.
  • Both fail to evolve consensus on formula for payment.
  • Provision of TSG is allowed; diversion of funds possible.

ISLAMABAD: The 48-hour deadline given by caretaker Prime Minister Anwar-ul-Haq Kakar has expired without any announcement of relief in inflated electricity bills owing to stiff resistance by the International Monetary Fund (IMF), The News reported Sunday.

“The IMF has not yet granted its assent on Pakistan’s request for deferment of electricity bills,” top official sources told The News.

PM Kakar said Thursday that he would provide relief to power consumers within 48 hours, but this could not be done by Saturday night, the stipulated deadline.

This scribe sent out questions to both the Ministry of Finance and Ministry of Power high-ups but got no reply.

However, sources said the IMF was giving a very tough time to Pakistani negotiators, so both sides were unable to evolve a consensus on the formula for payment of inflated bills in a staggered manner.

During this week, the Pakistani side shared its plan with the IMF to provide relief of up to 400 units of electricity in inflated bills. The IMF was given an assurance that none of its envisaged targets would be breached. 

However, the IMF raised questions about how the required subsidy amount would be financed without increasing the overall size of the agreed allocated amount of power sector subsidy of Rs967 billion for the current fiscal year.

The Ministry of Finance replied that they would comply with all the targets of the IMF, including a ban on supplementary grants for additional subsidy amounts. 

However, under the IMF programme, the provision of a Technical Supplementary Grant (TSG) is allowed, so the diversion of funds could be done without hiking the envisaged targets under budget deficit and primary deficit for the current fiscal year.

The Ministry of Finance presented its plan under which the required additional resources from the provision of an emergency allocation of Rs250 billion could be diverted towards the provision of additional requirement of subsidy for the power sector.

Pakistan would not breach the IMF’s envisaged targets on account of power subsidy, fixed target of accumulation in the circular debt as well as the primary surplus of 0.4% of GDP for the current fiscal year.

But the IMF again raised the question of the sustainability of the power sector and assurances that this situation might not surface again at a time when the bill collection of power distribution companies (Discos) had declined up to a significant mark.

It is yet to be ascertained about the decline in the collection of electricity bills at a time when the capacity repayments to IPPs had touched new heights of Rs2,200 billion for the current fiscal year. The Discos technical and financial losses had also accumulated to Rs520 billion for the last financial year, so all these losses were making the cash-bleeding power sector simply unsustainable.

Without undertaking basic structural changes, including changing the energy mix by reducing reliance on imported fuel, abandoning reliance on IPPs, promoting tax compliance to construct power plants from our own domestic resources, encouraging solarization, curbing theft, plugging transmission and distribution losses, and many others, this sector cannot be sustained anymore.

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