March 2020




By ​ Our Correspondent Published: March 28, 2020

ISLAMABAD: The government has notified a relief package for the five major export-oriented industries that will receive electricity at a subsidised rate.

According to a notification issued on Friday, the five export-oriented industries will be supplied electricity at 7.5 US cents per unit inclusive of all taxes and duties.

Under this package, the industries include textile, carpets, leather, sports and surgical goods. The package will be applicable from January 1, 2019 to June 30, 2020.

The finance ministry will release Rs23 billion under this package, which is likely to continue in next financial year 2020-21 as well with proposed subsidy of Rs20 billion.

The ECC of the cabinet had approved the relief package for the export-oriented industries on March 11, 2020.

In the wake of the COVID-19 outbreak, the Ministry of Energy, in a separate notification, directed all the power distribution companies to extend the date for submission of outstanding electricity bills for March till April 7, 2020. Electricity consumers will also be exempt from any late payment surcharge.

These industries were committed a fixed all-inclusive tariff of 7.5 US cents per unit (kWh) and a recommendation was submitted for consideration of the ECC.

The economic decision-making body agreed that the five major export sectors would be provided electricity at an all-inclusive rate of 7.5 cents per unit from January 1, 2019 to June 30, 2020.

The electricity bills issued from January 2019 to date, which included surcharges, quarterly adjustments, fuel price adjustments and Neelum-Jhelum surcharge, would be adjusted with a fixed tariff of 7.5 cents per unit.

The Finance Division will pay Rs23 billion in subsidy in FY20 to the Power Division in the first week of July 2020. An amount of Rs14 billion, out of the total of Rs23 billion, will be paid out of the Rs24-billion budget allocation for the gas sector whereas Rs9 billion will be provided through savings under various heads or savings under the Public Sector Development Programme (PSDP).

For continuation of the relief package in next fiscal year 2020-21, the subsidy will be capped at Rs20 billion.

Published in The Express Tribune, March 28th, 2020.



By Zafar Bhutta Published: March 18, 2020

ISLAMABAD: Profits of public gas utilities were likely to face a hit as the Petroleum Division on Tuesday announced the start of a consultation process to cut the benchmark unaccounted-for-gas (UFG) level and return on assets allowed to the utilities in a bid to rationalise gas tariffs.

At present, the Oil and Gas Regulatory Authority (Ogra) has allowed the gas companies 6.3% UFG and 17.34% return on assets. However, the UFG stands at 13% due to gas theft and inefficiency in systems of gas companies.

Consumers pay for the 6.3% UFG whereas the remaining loss is borne by the gas utilities. If the government lowers the UFG level by 1%, the gas companies would face a hit of Rs4 billion on their profitability.

Gas companies have been allowed 17.34% return on assets, which means that expansion of their pipeline networks will lead to a higher return and gas tariffs will also go up for the consumers.

If the return is slashed, the gas consumers will enjoy lower tariffs, say officials, adding that the real issue is not the rate of return on assets. “The real issue is the expansion of pipeline networks on political considerations, which is causing gas shortage and leading to higher gas tariffs,” said an official.

He added that the government should immediately put a ban on politically motivated new gas supply schemes.

Meanwhile, the Petroleum Division, in a statement, said it had initiated a process of consultation to consider reduction in the UFG benchmarks along with reduction in the return on assets and rationalisation of transmission and distribution costs to create some fiscal space for the companies instead of tariffs.

The current government at the outset faced a big challenge in the form of a financial deficit of over Rs150 billion incurred by the two Sui gas companies over a period of five years. Sui Northern Gas Pipelines Limited (SNGPL) and Sui Southern Gas Company Limited (SSGCL) had been forced by the successive governments to maintain low tariffs, especially for domestic consumers, to gain maximum political mileage.

A spokesperson for the Petroleum Division said the division had actively engaged with all key stakeholders – Ogra, board of directors and management of both Sui companies, to come-up with out-of-the-box solutions to reduce the burden of high gas prices on the most vulnerable section of society.

Both Sui companies are incurring gas losses (UFG) in double digits, which far exceed the best international practices. The UFG loss of 1% for the two companies in monetary terms exceeds Rs4 billion. Hence, the government has asked the gas utilities to curtail UFG losses or reduce the UFG level to ensure efficient use of gas.

The Petroleum Division aims to create some fiscal space for the companies instead of simply resorting to increase in tariffs.

The spokesperson added that the Petroleum Division was working to create a new thinking in the way the companies’ business was being run.

Published in The Express Tribune, March 18th, 2020.



Mohammad Akbar Notezaim Updated March 09, 2020

THE winter season has almost drawn to a close but some parts of the provincial capital are still facing a shortage of natural gas. Many areas in the centre of the city do without gas for several hours each day. The situation is worse on the outskirts of the city, even though the Sui Southern Gas Company says there’s no longer a shortage.

The people of Killi Qambrani, a suburban area to the south of Quetta, have had to contend with the problem right from the start of the season and are still doing so. In the month of January, Quetta was blanketed with snow, which turned the weather frosty. With the fall of snow, the supply of gas to the residents was almost discontinued.

Kashif, 18, the sole son of a Punjabi mother, belongs to this area. Over the years, he worked as a helper in various offices in the city, earning between Rs15,000 and Rs20,000 a month. This winter, however, due to some health complications, Kashif decided to quit his job and stay at home instead. Before quitting his job, he had about Rs50,000 in savings.

As is common in our society, his mother wanted to get him engaged as soon as possible because she wanted to “see him marry someone before her (own) death”. Although the pension of Kashif’s late father Liaquat Ali, who worked as a driver in the health department, is a pittance the mother and son thought it was sufficient to fullfil their household needs.

Meanwhile, Kashif’s mother found a girl who was to get engaged with Kashif after the end of the season. The expenditure the two families agreed upon for the ceremony was Rs80,000, which Kashif was to bear at the time of engagement.

However, as the weather grew worse in January and February, Kashif’s condition deteriorated. Instead of staying at home most of the time, he had to visit both private and government-run hospitals for his treatment. As a result, his savings were depleted within a short period. In time he had to take loans from his friends to meet his growing medical expenses.

I met Kashif in late February, on a busy Monday, in the Waris Hotel, situated near the city’s famous Jinnah Road. He looked neat and clean and was wearing a black woollen coat over a shalwar-kameez. He had a muffler with which he covered his neck and a part of his face to keep himself warm. Even though his mouth was covered most of the time, I could make out that he smiled several times during our conversation.

Even though he had not fully recovered from the condition he suffered from each winter, his health had improved somewhat lately, Kashif told Dawn. He explained that his health deteriorated every winter amidst the gas shortage and loadshedding in the city.

In the severe cold he could neither sit down nor keep standing in his room. “All I could do was wrap up my body with one or two blankets all the time,” he said.

“In a week, I had to go to hospital twice.” Answering a question, he said he had chest complications and a sore throat. But he couldn’t give me the name of the disease he was suffering from. “I vomited at times,” he added.

Balochistan was actually the first province in the country where gas was first discovered. Gas reserves were found back in 1952 in the Sui town of Dera Bugti district. Unfortunately, Quetta was provided gas not until 1985, which speaks volumes about the injustices faced by the province. Today, only five districts out of Balochistan’s 34 districts are connected to the national grid.

This winter was a particularly harsh one, particularly for the province’s nine districts. Because it snowed frequently many people lost their lives and many others were marooned in the snow. Also, many heads of cattle died due to the harsh weather.

All the nine MPAs from Quetta, along with their collea­gues in the Balochistan Assembly, mounted protests against the unabated gas loadshedding in the city. Unfortunately, their entreaties and appeals fell on deaf ears.

In the month of March, weather turns pleasant in Sindh. About half of Kashif’s extended family lives in Sukkur district, where he spends some time with his mother’s relatives. This time too he and his mother decided that they should go to Sindh.

Before leaving for Sukkur, Kashif’s mother went to the house of the girl who was to be engaged to him. Even before she could broach the subject of Kashif’s engagement, she was told in certain terms that they could not wait any longer. The girl’s family simply refused to give her hand to Kashif because he was jobless, and more importantly, because he had been unable to collect the money required for the engagement ceremony.

Published in Dawn, March 9th, 2020


Ali Hazrat Bacha | Fauzee Khan Mohmand Updated March 10, 2020

GHALANAI/PESHAWAR: Prime Minister Imran Khan on Monday said his government would no more increase gas and electricity rates as inflation had been contained and prices of essential commodities started coming down.

Addressing a public gathering after distributing Kafalat cards among deserving people under the anti-poverty Ehsaas programme, he said: “I have decided not to increase the power tariff anymore because the people can no longer afford. I have decided to take all possible measures to bring down the power tariff in any way.”

The prime minister said the prices had surged in the past due to the contracts signed by the previous government agreeing to the purchase of power and gas at exorbitant prices. He said that due to the 15-year gas contract signed by the previous government, Pakistan was getting gas supply at higher rates in the world.

Imran says prices surged due to contracts signed by previous government

He said his government would talk to the power producers and urge them to bring down electricity prices and close down those plants which were producing costly power as no more burden could be passed on to the people and industries.

The prime minister asked the people not to vote for a party with corrupt leadership and said the countries were not poor because of lack of resources, but corrupt rulers. Without naming the Sharifs, he said the whole family had fled abroad.

Mr Khan said that when he had raised the Panama Papers issue he faced several cases and six in the Election Commission and produced 40-year-old contracts and documents in his defence. “Did I flee to London? Neither did I flee nor complained of victimisation. When someone does not commit corruption, he needs not to flee,” he added.

Wishing durable peace and stability in war-ravaged Afghanistan, Prime Minster Khan expressed the hope that the [US-Taliban] peace accord will not only bring relief to the Afghan people but also to the dwellers of merged tribal districts in Pakistan. The agreement would benefit the people on both sides of the Pak-Afghan border, he added.

The prime minister said his government would make all-out efforts to enhance trade activities in tribal districts of Khyber Pakhtunkhwa, adding that opening of border with Afghanistan would create job opportunities for the people on both sides of the border.

He said that over eight million Kashmiri brethren and sisters had been locked down in their houses by Indian forces for the past seven months.

The prime minister said the Ehsaas Kafalat Programme was meant for the deserving families in the merged tribal districts, adding that the government was providing funds to the youth through this programme so that they could start their own business in tribal districts as well as the rest of the country. He said the health and education systems in the merged tribal districts were very poor and since there were no job opportunities, people were earning livelihood while working in Saudi Arab, the United Arab Emirates and others Middle East countries.

He admitted that the tribal areas and people had been badly affected by militancy and promised that the government would bring them on a par with the rest of the country. The merged districts would be put on the path to development and prosperity, he pledged, announcing that huge funds would be allocated for uplift schemes.

The prime minister asked the KP government to start mega development projects in tribal areas. He said the government would give 50,000 scholarships each year to the deserving students of merged districts and so far at least 2,500 students had applied for that.

He said Mohmand was suitable for olive trees plantation, adding that the government would soon establish a marble industrial estate in the district to create more job opportunities. He said drinking water would be provided to the local people from Mohmand dam. The prime minister directed federal Minister for Communications Murad Saeed to resolve the issue of 3G and 4G services in Mohmand on a priority basis.

Chief Minster Mahmood Khan, Governor Shah Farman, federal ministers Noorul Haq Qadari, Pervez Khattak and Murad Saeed, MNA Sajid Khan Mohmand and Ehsaas Programme chairperson Dr Sania Nishtar were also present on the occasion.

Addressing the opening ceremony of KP U-21 games at Qayyum Sports Complex in Peshawar, Prime Minister Khan said that certainly the nation was facing hardship but it was not a matter of concern as all the issues would be addressed very soon as effective system had already been introduced in each sector to facilitate people.

He said sports was vital for human beings as good health was a gift of Almighty Allah and keeping care of body meant achieving good physically as well as mentally as a good mind resided in healthy body. Talking about the new talent, he said ports should be promoted in the province to improve youth skills. “Life is the name of competitions and players should not be afraid of defeat as loss teaches us to put in more efforts. Continuous struggle is essential for success,” he added.

PM Khan said if he was not a sportsman he would have rather preferred to sit at home instead of competing continuously. The talent of Pakistan, he hoped, would emerge from these competitions. “Had I not played sports, I would have surrendered 22 years ago,” he said.

Earlier, all the players took part in the march past, followed by national anthem and other events.

Published in Dawn, March 10th, 2020


Khaleeq Kiani Updated March 11, 2020

ISLAMABAD: Despite repea­ted pronouncements by PM Imran Khan to have frozen energy prices until June, power companies working under the Power Division have sought up to Rs2 per unit increase in electricity rates for three months under monthly fuel price adjustments.

The National Electric Power Regulatory Authority (Nepra) has fixed three separate petitions filed by the Central Power Purchasing Agency (CPPA) on behalf of 10 ex-Water and Power Development Authority (Wapda) distribution companies for public hearing on Mar 25.

A CPPA official, when contacted, said a meeting at the Power Division had directed the agency to follow standard operating procedures to fulfil legal and regulatory requirements of filing petitions to Nepra for tariff adjustment until PM’s directives were materialised through formal decision making forums for implementation.

He conceded that PM had made public statements at different forums but those orders have not reached through official channels in written form.

The cumulative impact of the proposed tariff increase is estimated at about Rs32 billion provided the petitions for higher fuel price adjustment for electricity consumed in November, December and January are accepted by the regulator. The higher electricity rates, on approval by the regulator, would be recovered from consumers in the upcoming months.

Seeking retrospective adjustments for November, December and January

The CPPA claimed an additional cost of 98 paisa per unit for electricity consumed in November 2019, Rs1.49 per unit increase for December and Rs2.12 per unit for January under base tariff 2015-16.

The CPPA in its petitions said the distribution companies (Discos) had charged consumers a reference fuel tariff of Rs2.449 per unit in November while the actual fuel cost turned out to be Rs3.47 per unit. Hence, it should be allowed to charge 98 paisa per unit additional cost from consumers next month.

Similarly, it said the reference fuel charged to consumers for December was Rs5.78 per unit but actual fuel cost came in at Rs7.25 per unit. Therefore, Discos should be allowed to charge an additional cost of Rs1.49 per unit to consumers.

Moreover, in its third petition, the CPPA claimed an actual fuel cost of Rs6.48 per unit for January against a reference rate of Rs4.46 already charged to consumers. As such, it demanded an additional charge of Rs2.02 per unit to be billed to consumers.

Total energy generation from all sources in November 2019 was recorded at 7,434GWh. The total cost of energy generated amounted to Rs24.86bn, having an average per unit fuel cost of Rs3.344 per unit. About 7,204GWh were sold to Discos for Rs25.01bn. About 3.1 per cent units were reported as transmission losses.

Likewise, the total energy generation in December stood at 7,793GWh at a total cost of Rs46.65bn, having an average rate of Rs5.99 per unit. Of this, about 7,332GWh were sold to Discos for Rs53.13bn at an average rate of Rs7.25 per unit.

The total energy generation in January stood at 7,557GWh at a cost of Rs37.84bn or Rs5 per unit. Of this, about 7,309GWh were sold to Discos for Rs47.35bn at an average rate of Rs6.48 per unit.

The hydropower generation contributed 39pc to the overall production in November, 23pc in December and just 11pc in January due to annual canal closure. About 27.3pc contribution came from coal-based power plants in November, 29pc in December and 32pc in January.

The LNG-based power generation stood 9.2pc in November, 15pc in December and 12.3pc in January. The local gas-based production stood at 9.34pc in November, 15pc in December and 21pc in January.

The nuclear energy contributed 11.55pc in November, 9.2pc in December and 8.8pc in January. The share of wind power plants ranged between 1.8-2pc over the three months.

There was no fuel cost on hydroelectricity while coal-based fuel cost stood at about Rs5.8 per unit. Nuclear energy fuel cost stood at about Rs1.01 per unit while power produced through local gas ranged between Rs5.8 and Rs6.86 per unit. The cost of RLNG-based plants was worked out between Rs9.8 and Rs10.056 per unit. The electricity imported from Iran had a cost of Rs11.57 per unit and its total share in power supply was just 0.48pc.

The higher tariff adjustment will not be charged to lifeline consumers using up to 50 units per month but all other consumer of all categories including industrial sector and agriculture tube wells would have to bear the additional burden. The revised rates would also not apply to K-Electric consumers.

Published in Dawn, March 11th, 2020


Khaleeq Kiani Updated March 12, 2020

ISLAMABAD: The government on Wednesday approved Rs20 billion special relief package for export industries and agreed in principle to a Rs1,400 per 40kg support price for wheat procurement involving a total financing of about Rs289bn.

The decisions were taken at a meeting of the Economic Coordination Committee (ECC) of the Cabinet presided over by Adviser to PM on Finance and Revenue Dr Abdul Hafeez Shaikh.

“The ECC approved a proposal by the Power Division for a special relief package of Rs20bn to further continue provision of subsidised electricity until June to five export-oriented sectors,” said statement issued by the Ministry of Finance after the meeting.

The decision was based on an agreement reached between a ministerial committee and the export-oriented sectors on Feb 26. The ECC also directed that a committee comprising Economic Affairs Minister Hammad Azhar, Energy Minister Omar Ayub Khan and representatives of the Federal Board of Revenue (FBR), Power Division, Law Division and the State Bank of Pakistan for a proper definition of export sector and a mechanism to ensure that public money flows only to the deserving sectors.

The directive came when on an enquiry from Dr Shaikh, Power Secretary Irfan Ali reported that power subsidy was normally provided to the export sector on the certification of the FBR.

Agrees to fix wheat procurement price at Rs1,400 per 40kg

Under the Feb 26 agreement, the zero rated industries including textiles would be provided electricity at an all-inclusive rate of 7.5 cents per unit (Kwh) and gas at $6.5 per unit (million British thermal unit) until June 30. The agreement required immediate withdrawal of electricity bills issued to export sector with backdated effect from January 2019 which had included a series of surcharges, quarterly adjustments and fuel price adjustments. This would be adjusted against the fresh Rs20bn subsidy.

The government had also accepted a demand of the industry to allow import of Liquefied Natural Gas (LNG) directly by the private sector. It was estimated that LNG could be available to industry at about $5.5 per mmBtu through private sector imports compared to $8-10 per mmBtu through the public sector.

The ECC also discussed in detail the proposal for increase in wheat support price from Rs1,365 per 40kg to Rs1,400 for 2019-20 crop. Based on comments from the participants, Shaikh agreed in principle to fix Rs1,400 per 40 kg support price but linked it to finalisation of a plan in consultation with provinces to ensure stable prices for the public throughout the year with tangible responsibilities to various stakeholders.

Therefore, a dedicated meeting on the subject has been called on Thursday for a detailed plan to keep the flour prices at the lowest possible level throughout the year in view of any increase in support price and incidental charges for supply of the Pakistan Agricultural Storage and Services Corporation (Passco) procured wheat to provinces and allied issues related to procurement of wheat by provinces and the private sector.

It was noted that the Passco had been given the responsibility for procurement of 1.8 million tonnes of wheat at a cost of Rs63bn on behalf of the federal government. Therefore, there should be a clear roadmap as to why the centre would foot the bill and what options it would have in case any stakeholder failed to honour its responsibility.

Also, there should be clear roles for all stakeholders including the provinces as to the provision of incidental charges, gunny bags and release of wheat to the flour mills so as to ensure that problems faced recently due to price hike and shortage are not repeated next year.

Questions were also raised as to why the government should be in the business of wheat procurement and how long this could be sustained in the public sector and why the private sector should not take over the role under a robust monitoring mechanism. Some of the ECC members opined that public sector role in wheat operations was necessitated by entrenched vested interests of certain quarters benefiting at public expense at different levels.

The committee was informed that a total of 8.25m tonnes of wheat would be procured this year at an estimated cost of about Rs289bn. Total estimate for wheat crop was estimated at 27m tonnes.

Of this, Punjab’s wheat procurement bill was estimated at Rs157bn, followed by Passco’s Rs63bn, Sindh’s Rs50bn, KP’s Rs15.75bn and Balochistan’s Rs3.5bn. That would mean that about 60 per cent (16.2m tonnes of wheat) would be retained by the growers while about 10.8m tonnes would be available to the market including 8.25m tonnes by the public sector and remaining 2.55m tonnes by the private sector.

The ECC also approved a proposal by Ministry of Energy for two amendments aimed at providing ease of doing business to upstream petroleum sector. The amendments are related to extension of exploration licences beyond two years by the ECC rather than the minister in charge of Petroleum Division and creation of a new Zone-1 (F) for onshore licensing regime and consequent revision in the Zonal Map.

The ECC also okayed the National Telecommunication Corporation’s revised budget estimates for 2018-19 and 2019-20. The ECC also gave an in principal approval for a proposal for Saudi Riyal 22.5m equity investments abroad by Eastern Products Pvt (Ltd) Pakistan.

Published in Dawn, March 12th, 2020.



Amir Wasim Updated March 03, 2020

ISLAMABAD: The opposition Pakistan Muslim League-Nawaz (PML-N) and Pakistan Peoples Party (PPP) have blasted the government over up to 106 per cent increase in the rate of petroleum development levy.

Leader of the Opposition in the National Assembly and PML-N president Shahbaz Sharif not only “condemned” the increase in the levy but also called for a parliamentary investigation into this “organised scheme of looting billions from the nation”.

Similarly, parliamentary leader of the PPP in the Senate Sherry Rehman said the government had burnt another hole in the pockets of the poor citizens of this country with the increase in petroleum levy.

In a statement issued from London and released to the media here on Monday, Shahbaz Sharif said it must be investigated as why the government reduced diesel prices by just Rs5 per litre when the Oil and Gas Regulatory Authority had proposed a reduction of Rs12.40.

“This government has no right to insult and deride the poor Pakistanis by posing to care about the impoverished when they have been caught red-handed stealing Rs10 billion every month from the nation through this levy. (PM) Imran is butchering the nation with his cleaver of inflation while pretending to be innocent and clueless about it,” the PML-N president said.

While Shahbaz issues condemnation, Sherry says the govt has given another jolt to the poor

He said this unacceptable levy of Rs25 on diesel, more than Rs19 on petrol and 105.5pc increase in the levy on kerosene was “brutal and beyond imagination”.

“The inflation in kerosene price is the highest since 2009 which is extremely condemnable,” he added.

The opposition leader said this injustice with the people of Pakistan despite drastic decrease in international oil prices must not go unaccounted for. “Despite looting the nation through similar schemes and scams with both hands, this government registered a Rs480 billion revenue shortfall in the first eight months of the running fiscal year,” he pointed out.

Mr Sharif said the increase of 12.4pc in the cost of edible items was unbearable. He reminded that not once during 60 months of the PML-N government did inflation touch double digits, but today it had shot up 14.4pc. He said as long as wheat and sugar thieves were running the country, the poor would continue to starve.

“This government’s transparency can be gauged by the fact that the so-called prime minister knows about the mafia but doesn’t say a word,” he said.

“Why hasn’t the investigation report on the wheat and sugar crises been made public? Why is Imran Niazi protecting the culprits? Why do these wheat and sugar thieves and hoarders enjoy the prime minister’s patronage?”

PPP’s Sherry Rehman said it appeared that by reducing petrol prices by a negligible Rs5, the rulers were just laying the groundwork for dropping the levy bomb that would send prices of several commodities across the country soaring.

“Even Rs5 reduction in petrol prices was inadequate when we see where the global oil prices stand. Globally, oil prices are down by nearly 30pc. It is unfortunate that when international prices go up the government is quick to shift its impact on the people but when they go down, the domestic prices are so disproportionately reduced,” she regretted.

“Agriculture, transport and small industries, all will bear the crippling side effects of the levy being imposed in addition to the gas and power tariffs already imposed on them. This is quite clearly an IMF-run government, incapable of protecting its citizens who have remained incessantly exposed to a vicious inflationary cycle,” Ms Rehman said.

“Why is the government’s policy not focused on widening the tax base and taxing the rich?”

So far, she said, the weight of all the additional revenue earning measures had fallen on the backs of taxpayers while the privileged few were busy profiteering from sugar and flour crises.

Recently, the PPP leader said, the National Electric Power Regulatory Authority too had asked for a national power emergency to be declared with the circular debt swelling by a monthly average of Rs42bn. Overall, it has reached an alarming Rs1.93 trillion as opposed to the undervalued figures being provided by the power division, she added.

She regretted that all this was happening despite the regular hikes in power tariff.

Published in Dawn, March 3rd, 2020


Khaleeq Kiani Updated March 04, 2020

ISLAMABAD: The Pakistan Electric Power Company (Pepco) — a defunct holding company of the Power Division — has reported total payables by sector power companies at Rs1.882 trillion as of Jan 31.

In a report submitted to a Special Committee of the Senate, Pepco reported total receivables of the power sector at Rs1.178tr. That would mean that even if all the receivables of the power companies were recovered, there would still be gap of Rs704bn to be funded by the government through borrowing or increase in consumer tariffs.

The report said the public sector payables to the Independent Power Producers amounted to more than Rs696 billion by the end of January. Surprisingly, the government-run power companies have also been holding back payments to the Water and Power Development Authority (Wapda). The payables to Wapda amounted to about Rs222bn by end-January.

Payables against oil suppliers and gas suppliers amounted to Rs75.2bn and Rs82.27bn respectively while circular debt parked against the Power Holding Private Ltd — another holding company of the Power Division — increased to Rs807bn.

Strangely though, the Pakistan State Oil (PSO) alone has reported total receivables of more than Rs357bn, including Rs140bn from public sector generation companies as of Feb 20. The PSO’s total receivables from the power sector amounted to Rs206bn, Another Rs151bn are payable by other entities including Rs94bn by the Sui Northern Gas Pipelines Limited on account of Liquefied Natural Gas non-payments and Rs57bn payable by the Pakistan International Airlines and the Ministry of Finance.

Of the total Rs1.178tr receivables of the power companies, the outstanding amounts against the public sector entities and K-Electric amounted to Rs670bn. This included Rs17bn against federal government, Rs127bn against AJK government, Rs283bn against agriculture tube wells in Balochistan, Rs137bn against K-Electric, and Rs38bn against FATA and about Rs62bn against provincial governments.

Strangely, the outstanding dues against private consumers stood at Rs509bn by end of January this year even though the distribution companies usually disconnect electricity connection for non-payment of electricity bills within 30 days.

Pepco report explained the circular debt was emerging mainly due to non-availability of required funds to pay off the liabilities of power producers because of shortage of cash flow. It blamed almost all the public sector entities for the buildup of circular debt.

On top of all, Pepco blamed the delayed and inadequate tariff determinations by the National Electric Power Regulatory Authority (Nepra), delayed tariff notifications by the federal government, excess losses and low recovery by the distribution companies (Discos) against Nepra targets, nonpayment of subsidies by the federal government in a timely manner, non-payment of dues by AJK, FATA, Balochistan Tubewell and KE and funds held by the federal board of revenue on account of tax paid on billing instead of collections and obstacles in payment of refunds.

Pepco also reported that average electricity sale rate to consumers had increased by Rs3 per unit — about 23.4 per cent in six months — between August 2019 to January. The report said the average sale rate stood at Rs12.77 per unit which increased to Rs14.88 per unit in November and Rs15.76 per unit in January.

Informed sources said the power companies have already sought a fixed fuel price increase of about Rs1.50 per unit for discos for three months (November-January) based on actual requirement of about 90 paisa adjustment for one month, Rs1.2 per another month and about Rs1.50per unit for third month.

This could create additional revenue cushion to the power companies because under the existing mechanism fuel price adjustment of every month is fixed separately and comes into force on expiry of the previous month.

Published in Dawn, March 4th, 2020


Khaleeq Kiani Updated March 05, 2020

ISLAMABAD: Irked by procedural and institutional delays, Prime Minister Imran Khan on Wednesday ordered immediate implementation of subsidised electricity tariff for export industry to ensure predictability and business confidence.

The orders came after a meeting of the Economic Coordination Committee (ECC) of the cabinet deferred formal approval to an agreement reached last week between export industries and a ministerial committee over energy tariffs.

Informed sources said Federal Minister for Power and Petroleum Omar Ayub Khan and Federal Minister for Economic Affairs Hammad Azhar had different estimates over the amount of subsidy and the definition of industries to benefit from the subsidy scheme. The sources said the Power Division had estimated about Rs28 billion worth of additional subsidy while some other members of the ECC believed the true cost of subsidy would be somewhere between Rs50-60bn.

Adviser to PM on Finance and Revenue Dr Abdul Hafeez Shaikh desired that a detailed discussion should take place on the subject at a meeting of the ECC.

The sources said the PM’s Adviser on Commerce and Industries Abdul Razak Dawood later took up the matter with PM and informed him that Pakistan’s exports had increased by about 3.62 per cent in July-February due to subsidised energy rates provided by the current government.

On top of that, the exports of value added items like knitwear, home textile, readymade garments and other textile material had also increased significantly while exports of raw cotton had declined which suggested raw cotton was being turned into value added items.

Therefore, it was time for the government to support export sector instead of creating uncertainty. As a result, PM expressed his displeasure over unnecessary delays and ordered that agreement reached with the export sectors last week should be implemented in full spirit irrespective of the financial cost.

Under an agreement last week, the zero-rated industries including textiles would be provided electricity at an all-inclusive rate of 7.5 cents per unit (Kwh) and gas at $6.5 per unit (million British thermal unit) until June 30. The agreement required immediate withdrawal of electricity bills issued to export sector with backdated effect from January 2019 which had included a series of surcharges, quarterly adjustments and fuel price adjustments.

The government had also accepted industry’s demand to allow import of Liquefied Natural Gas (LNG) directly by the private sector. It was estimated that LNG could be available to industry at about $5.5 per mmBtu through private sector imports compared to $8-10 per mmBtu through the public sector.

“The meeting resolved all outstanding issues relating to energy tariff”, a statement issued by the Power Division had said on Feb 26 after holding talks with a delegation of the All Pakistan Textile Mills Association and zero-rated industries. The government team included Federal Minister for Power and Petroleum Omar Ayub Khan, Federal Minister for Economic Affairs Hamad Azhar, Special Assistant to PM on Petroleum Nadeem Babar, Adviser on Industries and Commerce Abdul Razaq Dawood and Punjab Governor Muhammad Sarwar.

The Power Division had stated that it had been decided that the government will provide a maximum of Rs20bn additional subsidy for power and petroleum in the next year budget and to provide all-out support to these industries for better economic growth of the country.

The export industry had been threatening over past two months to close down their factories and businesses after the power companies issued bills at higher rates and that too with retrospective effect from January 2019.

The National Assembly’s Standing Committee on Finance and Revenue had earlier ordered suspension of increased power rates for export industries and its retrospective recovery from Jan 1, 2019 and took up the matter with PM.

The Power Division had issued a notification on Jan 13 this year which the industry and the parliamentary panels described as “unauthorised” as it increased electricity rates for export sector from 7.5 cents per unit to about 13 cents per unit.

The export industry had been promised by the government in February 2019 that they would be provided electricity at 7.5 cents per unit including all surcharges. This was estimated to entail about Rs30bn subsidy.

The package was fully implemented under duly issued notification after the ECC approval until the Power Division issued a fresh notification on Jan 13 under which the subsidy was limited to 7.5 cents as base tariff and all add-ons were put on the consumers.

Published in Dawn, March 5th, 2020


March 05, 2020

ISLAMABAD: The Economic Coordination Committee (ECC) of the Cabinet has delayed its decision on the quarterly tariff adjustments for K-Electric, and has formed a committee to submit a report within a week for further review.

The ECC meeting held here on Tuesday with Adviser to the Prime Minister on Finance and Revenue Dr Abdul Hafeez Shaikh in the chair, and discussed a proposal regarding quarterly adjustments of the K-Eectric Limited for the period from July 2016 to March 2019.

In December, the National Electric Power Regulatory Authority (Nepra) had recommended the quarterly adjustment claims of the K-Electric for the period from July-September 2016 to January-March 2019 and allowed 38 percent or Rs4.87 per unit to Rs17.69 from Rs12.82 per unit across the board for 11 quarters from Jul-Sep 2016 to Jan-Mar 2019 under the quarterly adjustment formula.

The ECC discussed the matter, and in the light of input and discussion by the members, set up a committee including Minister for Power Omar Ayub Khan, Minister for Economic Affairs Hammad Azhar, Deputy Chairman Planning Commission, secretary Finance and a representative from the K-Electric, to examine the issue in detail and recommend to the ECC within a week a solution and roadmap for resolving the issue.

The ECC approved a technical supplementary grant of Rs9.6 billion to incentivise a host of measures to encourage and facilitate the overseas Pakistanis to send their remittances through official banking channels.

Under the decision, following measures for the enhancement of home remittances through banking channels were approved:

  1. The rebate of reimbursement of TT charges transactions between USD100 and USD200 will be increased from SAR-10/- to SAR-20/-.
  2. Continuation of the new scheme of incentives launched in 2018-2019 for banks and exchange companies during the current calendar year from January 2020. As per the scheme, financial institutions would be incentivized Re0.50 per 1 USD on 5 percent growth, Re0.75 per 1USD on 10 percent growth and Re1/- per 1USD on 15 percent growth.

iii. The amount of the remittances transferred into bank accounts will be exempted from withholding tax with effect from July 1, 2020.

  1. A “National Remittance Loyalty Program” will be launched from September 1, 2020 with collaboration of major commercial banks and government agencies through which various incentives will be given to remitters through mobile apps and cards.
  2. The ECC approved a technical supplementary grant of Rs9.6 billion during the current financial year to finance the above mentioned initiatives.

Taking up other agenda items, the ECC approved a proposal by the Ministry of Federal Education and Professional Training for a technical supplementary grant of Rs5 billion in favour of the Higher Education Commission (HEC) for the current financial year with instruction for a judicious and need-based distribution of funds among the universities.

The HEC had submitted a summary to the ECC of the cabinet, while seeking a supplementary grant of Rs5 billion for the current fiscal year to meet public sector universities’ expenses.

The HEC had demanded Rs103.5 billion for the fiscal year 2019-2020 to meet current expenditures, but the government approved Rs59 billion, and Rs28 billion for the development sector against the demand of Rs55 billion.

The government’s allocation of Rs59 billion for the current financial year to meet current expenditure was 9 per cent less than last year’s budgetary allocation of Rs65 billion and it was around 40 per cent less than demand of Rs103 billion for the current fiscal year.

The ECC also approved a proposal by the National Security Division for a technical supplementary grant amounting to Rs15 million for the Strategic Policy Planning Cell (SPPC) created in the National Security Division with the approval of the prime minister to act as an intellectual hub for evidence-based policy input on key national security issues.

On a proposal by the Ministry of Defence, the ECC okayed a proposal for a technical supplementary grant of Rs34.528 million for Internal Security Duty Allowance to the Pakistan Air Force.

On a proposal by the Petroleum Division, the ECC approved allocation of gas to SSGC and Provisional Tight Gas Incentive for Rehman-4 Well in Kirthar Block subject to the finalisation and approval of requisite third-party certifications for tight gas for the same well.

The ECC also deliberated upon a proposal by the Ministry of Energy to further extend till June 2020 the grant of subsidy to agricultural tubewell consumers in Balochistan.

Earlier, the ECC was briefed that nearly 30,000 agri-consumers in Balochistan had been given subsidy since January 1, 2015 with 40 percent of the burden of subsidy borne by the Government of Pakistan and the remaining 60 percent picked up by the Balochistan government.

However, the recovery of dues from farmers for the electricity consumed over and above the limit of subsidy had been negligible and attempts to recover these dues from defaulters in the past had not been successful.

The ECC discussed the issue in detail and set up a committee, comprising among others, the Minister for Power, to discuss the issue with the Government of Balochistan to ensure a credible solution to the problems impeding a judicious execution of the scheme for which the federal government alone was contributing Rs9 billion annually, and also allowed the extension of subsidy until a solution to the issue was found by the committee and put in place.

On a proposal by the Ministry of Industries and Production for revival of M/s Tuwairqi Steel Mills Limited (TSML) – A Direct Reduced Iron (DRI) Unit, the ECC discussed the issue and asked the Ministry of Industries and Production to resubmit the proposal in the light of recent and ongoing development on various issues among stakeholders on the proposal.—TAHIR AMIN