ISLAMABAD: With K-Electric’s payables to the national grid at Rs592 billion and rising at Rs16bn per month, the Economic Coordination Committee (ECC) of the Cabinet on Wednesday decided to increase KE’s consumer tariff by Rs1.52 per unit for a year earlier blocked by the private utility for over three years through litigation.

On top of this, the ECC led by Finance Minister Ishaq Dar also decided to inject an additional amount of about Rs147bn in the power sector including payment of Rs76bn tariff differential subsidy (TDS) on behalf of KE to the national grid whose finances are handled by Central Power Purchasing Agency (CPPA). Eight other supplementary grants worth Rs8.28bn were also approved.

The ECC also relaxed restrictions on the imports of pharmaceutical raw materials and timber & wood for another four months ending Oct 31.

The meeting was told that since 2018-19, the KE had stopped paying CPPA against power purchase invoices citing a clause of the power purchase agreement that expired in 2015 but power supplies from the national grid not only continued but almost doubled to Karachi without any agreement and payments. The KE attributed the non-payments to pending subsidies receivables from the government.

ECC extends import relaxations for pharma and timber sectors

“KE outstanding payable towards CPPA has reached Rs448bn as of September 2022 (including markup) and this is further adding around Rs16bn every month”, said the Power Division putting the outstanding subsidies payable to KE at Rs250bn.

The Power Division also told the meeting that a series of quarterly tariff adjustments paid by the consumers of all the public sector distribution companies years ago could not be charged to KE consumers due to litigation on multi-year tariffs (MYT) of KE. The amount for the period from July 2019 to September 2020 pending so far had an impact of Rs24.5bn.

The power division proposed that Rs24.5bn be charged to KE consumers at the rate of Rs1.52 per unit over 12 months on the principle of equity with consumers of Discos who had already paid higher tariff and the remaining Rs250.7bn be provided as tariff differential subsidy.

The ECC further allowed the release and utilisation of the available budget of Rs76bn as advance subsidy payment to CPPA against KE’s tariff differential subsidy. Nepra would now be asked to issue a fresh schedule of tariff for KE by including Rs1.52 per unit for 12 months. It also approved another summary of the Power Division regarding the implementation of a Revised Circular Debt Management Plan and utilisation of Rs20.726bn to government-owned power plants (GPPs).

The ECC authorised Power Division to utilise a one-time full amount out of the assignment account in relaxation of limit of using Rs4bn per month during June for the next five months and to ensure that there will be no more payment liability to IPPs for the period July to November.

On this count, the power division said the federal cabinet had approved the RCDMP on Feb 14 envisaging a Rs905bn budget to manage the critical cashflow requirements and to curtail the circular debt. This involved Rs180bn budget allocations for IPPs stock payments.

Earlier, the cabinet had created in October last year at SBP a revolving account — Pakistan Energy Revolving Fund — on the pressing demand of China with an initial amount of Rs50bn for payment of at least Rs4bn every month.

Of the Rs180bn budget for the outgoing fiscal, Rs159bn has already been paid to various power producers while Rs20.73bn was still available which would now be paid to GPPs whose current payables stand at Rs790bn.

On top of this, another Rs56bn supplementary grant on account of subsidy allocations for Azad Kashmir to enable the power division to “draw the advance subsidy amounting to Rs56bn against the receivables of Azad Kashmir.

The meeting also approved eight other supplementary grants of Rs8.5bn.

Published in Dawn, June 22nd, 2023