ISLAMABAD: The ministry of water and power has sought a 15 per cent immediate increase in electricity tariff to finance a rising energy sector circular debt that has now become higher than the development programme.
The move has become so politicised that the ministry of finance has blocked the tariff increase until a full picture is presented by the minister for water and power to clarify where the revenue raised through the 95 per cent increase over the past one year was going.
Sources told Dawn on Wednesday that the request for tariff increase had also been opposed by the political leadership, fearing a strong backlash at a time when the government was facing stiff resistance in introduction of new tax measures and criticism for rising inflation.
The sources said the ministries of finance, water and power and petroleum and natural resources have been engaged in hectic consultations over the rising energy circular debt the size of which in itself has become controversial.
Notwithstanding different figures being quoted about the circular debt, all the three ministries agree that it is in excess of Rs225 billion whereas the trimmed down public sector development programme (PSDP) is Rs185 billion.
The petroleum ministry is reported to have complained about non-clearance of oil and gas dues. As a result, the receivables of Pakistan State Oil rose to Rs157 billion a few days ago.
An amount of Rs26 billion released by the federal government, however, diluted the receivables to Rs130 billion on Dec 25.
Another Rs10 billion was also paid to Parco and a couple of refineries and marketing companies on account of price differentials this week, the sources said.
They said there were strong indications that the PSDP might further be cut down to Rs120 billion in view of rising fiscal deficit.
The power ministry, they said, had sought a subsidy of Rs145 billion, or a 15 per cent tariff increase, to meet the gap between the cost of power generation and revenue collection.
The sources said the figures put forth by the petroleum ministry suggested the circular debt at Rs325 billion while the ministry of finance believed there were some double accounting in such estimates because of different billing and payment schedules.
According to finance ministry estimates, the size of the circular debt was about Rs225 billion if late payment surcharges payable on outstanding receivables and billing cycles were reconciled.
The petroleum ministry believed that power companies were utilising revenue received through increased electricity bills to improve their own financial health instead of making payments to fuel suppliers.
As a result, the fuel suppliers are unable to meet demand for power generation, leading to non-utilisation of full generation capacity at a time when hydel generation has drastically come down because of annual canal closure.
“We have offered the power ministry to manage the federal budget. We cannot give them more money,” a finance ministry official said, adding the federal budget was prepared on the basis of the power ministry’s demand for a Rs30 billion subsidy, but now it was seeking Rs145 billion.
The petroleum ministry has taken a strong position that most of its companies, like OGDC, PSO, gas companies, refineries and marketing companies – both in the public and private sectors – were operating at a loss and were finding it difficult to ensure smooth supplies, affecting the government’s share in profits and dividends.
“The ministry of water and power should clear oil and gas receivables. This is the only way to dissolve the circular debt and to ensure uninterrupted energy supplies,” a senior government official said.
The power ministry officials, however, blamed the public sector and provincial governments for non-payment of electricity dues despite clear instructions by the prime minister.
A power ministry spokesman said the National Electric Power Regulatory Authority had reduced power rates by Rs1.08 per unit on account of fuel adjustment for November after decline in oil prices and improved fuel mix.
The total reduction in tariff under oil price adjustment, he said, amounted to Rs2.09 per unit in three months (August-October).