ISLAMABAD: To implement one of the preconditions for the implementation of the International Monetary Fund (IMF) staff-level agreement, the Economic Coordination Committee (ECC) of the Cabinet on Friday approved the Approved to withdraw subsidy given in electricity tariff. Oriented sector and farmer package.
According to a statement issued after the ECC meeting, Federal Minister for Finance and Revenue Senator Ishaq Dar presided over the ECC meeting in which the revenue and financial measures to be taken to meet the demand of the Washington-based lender were discussed. Measures were reviewed.
Reforms in the energy sector and controlling revolving credit were high on the agenda during talks with the IMF mission at the end of the 10-day talks in Islamabad on Thursday.
The IMF team left Islamabad without signing the agreement and asked Pakistan to take corrective measures in this regard.
The ECC met to review the situation and take necessary steps.
Electricity tariff
Under various headings, including quarterly tariff adjustments, deferred fuel price adjustments, and imposition of a Rs.1 per unit surcharge on large electricity consumers, the government approved a revised Circular Debt Management Plan (CDMP) where tariffs About Rs 7-8 per unit will be increased. Unit till August 2023.
The basic consumer tariff will be increased from Rs 15.28 per unit in June 2022 to Rs 23.39 per unit by June 2023.
Sources say that the IMF had asked the government to increase the base tariff by Rs 4.06 paisa per unit, but the government did not approve anything in this regard under the revised CDMP.
It is yet to be seen how the IMF’s demand has been incorporated in the Memorandum of Economic and Financial Policies (MEFP) handed over to Pakistan on February 10, 2023. It is believed that if the IMF insists on a further increase in the base tariff, then the Pakistani authorities will have to increase the tariff by Rs 9 to Rs 11 per unit.
So far, the government has protected electricity consumers of 300 units from future tariff hike.
However, the revised CDMP did not discuss any increase in the basic electricity tariff as demanded by the IMF to mitigate the additional subsidy requirement of Rs 335 billion.
The additional subsidy requirement has been reduced from Rs 675 billion to Rs 335 billion on the IMF’s directive and the government has indicated to make it part of the stock of the revolving credit monster.
Circular Debt Management Plan
The revised CDMP revealed that the government had approved withdrawal of power sector subsidy for export sectors from March 1, 2023 to save Rs 51 billion. The government also withdrew the Kisan package from March 1, 2023 to save Rs 14 billion.
With a base case scenario of increasing revolving credit by Rs 952 billion to Rs 336 billion in FY 2023, the government approved a plan to implement quarterly tariff adjustments from February 23 to March 23 ( QTA) Q-1 rate will be increased by Rs.3.21 per unit, the government will receive Rs.40 billion, from March 2023 to May 2023 QTA Q-2 at Rs.0.69 per unit, the government will receive Rs.17 billion, QTA- 3 will receive from June 23. At the rate of Rs 1.64 per unit in August 2023, the government will receive Rs 16 billion.
Keeping the losses of Distribution Companies (DISCOs) at an average of 16.27% will result in a recovery of Rs.12 billion.
By June 30, 2023, fuel cost adjustment (FCA) recovery will help recover Rs 31 billion, imposition of surcharge will help Power Holding Limited (PHL) recover Rs 68 billion from markup recovery, zero Closing the rating regime package will save. 51 billion rupees, 14 billion rupees will be collected from the closure of Kisan package from March 1, 14 billion rupees will be collected from the collection of GST and other taxes and 5 billion rupees will be collected from the Federal Board of Revenue of Pakistan (FBR). .
CDMP envisages that the government will provide an additional subsidy of Rs 335 billion. Revolving credit is estimated at 336 billion rupees. If the revised CDMP is implemented in full and without delay, the stock of revolving credit would stand at Rs 2,374 billion by the end of FY 2023.
However, the CDMP envisaged an exchange average of Rs 234 to the dollar, Karachi Interbank Offered Rates (KIBOR) 16.84%, LIBOR 4.73%, RFO (USD/MT) $610, RLNG $14.30 per mm. Btu. Imported coal at $236 per MT, domestic gas at Rs.857 per MMBTU and demand at 134 Bkwh.
