Business

IMF wants govt to pass on Rs65bn burden to power consumers

Published

1 year ago

Farwa

Government has agreed with IMF that Rs55 billion would be passed on to consumers.
Remaining Rs10 billion would be absorbed through subsidy.
Pakistan’s cash-bleeding power sector is moving rapidly towards bankruptcy.

ISLAMABAD: The International Monetary Fund (IMF) has asked Pakistan to pass on Rs65 billion to consumers of electricity which has been deferred in the shape of Fuel Price Adjustments (FPA) during the peak of last summer season.

Out of the total outstanding amount of Rs65 billion on account of deferment of FPA in the electricity bills in the current fiscal year, the government has agreed with the IMF that Rs55 billion would be passed on to consumers and that would be recovered through bills. The remaining Rs10 billion would be absorbed through the allocation of subsidy amount.

In a grim situation, Pakistan’s cash-bleeding power sector is moving rapidly towards bankruptcy, as its total accumulated losses might climb up to Rs1,734 billion for the current fiscal year with the adoption of a status quo approach.

On the other hand, the consumers consider themselves voiceless because the word reform means hiking of tariffs, but actually it results in jumping theft in this sector.

Out of the total accumulated losses of Rs1,700 to Rs1,800 billion, there is a possibility of a subsidy of Rs1,000 billion and around Rs700 to 800 billion piling up in the monster of circular debt if no remedial measures are taken by the government.

Now, the multilateral creditors, including IMF/World Bank, are asking the government to come up with plans to finance the un-budgeted subsidies, including the K-Electric subsidy for which the Ministry of Finance allocated Rs26 billion against revised projections of Rs162 billion, surfacing a gap of Rs136 billion where no amount was available to bridge this gap.

The same scenario prevailed for the Zero Rating Industry (ZRI) and Kissan Package for which the government did not make subsidy allocations of Rs118 billion and Rs28 billion respectively in the current fiscal year.

The IMF also raised concerns over the failure to receive a deferred payment of bills on account of Fuel Price Adjustment, which is estimated to cost Rs65 billion. The bill recovery was reduced from the original target of 93.58% to 92%, creating a gap of Rs55 billion in the current fiscal year.

The theft of electricity target is also missed as the Transmission and Distribution (T&D) losses target was revised upward from 15.83% to 16.27%, which would result in a deficit of Rs31 billion.

The generation cost recovery is going to cause a financial loss of Rs63 billion. Rs24 billion for May-23 and Jun-23 FCA and Rs39 billion for Q3 & Q4 FY-23 Quarterly Tariff Adjustment (QTA) would be recovered in FY-24.

The hike in markup in recent months also jumped up liabilities of the power sector as the markup on IPPs and Power Holding Company increased from Rs185 billion to Rs249 billion, registering an increase of Rs64 billion.

The K-Electric resolution of subsidy will cause an additional burden of Rs136 billion for which the Finance Division did not make any budgetary allocation in the budget.

In the wake of less demand for power from 45 billion units to 40 billion units in the first quarter of the current fiscal year, the revenues dropped from Rs493 billion to Rs347 billion, registering a loss of Rs55 billion. The non-recovered GST paid to FBR is projected to cause a loss of Rs91 billion in the current fiscal year.

Now, it is expected there will be a possibility of generating financial losses in the range of Rs700 to Rs800 billion accumulating into the form of circular debt in the current fiscal year if the government did not hike the tariffs, bring efficiency and improve governance in cash-bleeding power sector.

Business

Exchange achieves all-time high: KSE-100 index surpasses 72,500 points

Published

19 hours ago

Farwa

With the benchmark KSE-100 index hitting a record-breaking high of 72,501 points, the Karachi Stock Exchange saw yet another incredible rise.

Within Pakistan’s financial environment, investors demonstrated a strong sense of trust in the market as the bullish trend continued.

As a result of the significant inflow of investment and optimism among market players, the index had an amazing 450-point rise during the trading session.

In their analysis of the market’s remarkable performance, financial analysts pointed to a number of causes for the upward trend, such as encouraging economic data, robust company profits, and the government’s proactive measures to promote economic expansion.

The durability and upward momentum of the market have also been greatly aided by continuous infrastructural investments and efforts meant to boost investor confidence.

In the meantime, interbank rates increased by six paisas, and the US dollar’s value saw a slight rise in the currency market. As a result of the current market conditions and the dynamic nature of foreign exchange swings, the dollar was quoted at Rs 278.45 in the interbank market.

Business

The investment plan for K-Electric will be audited every three months.

Published

20 hours ago

Farwa

In light of K-Electric’s inability to persuade NEPRA with its Rs. 484 billion investment plan, the regulatory body has decided to hold off on making changes to the utility’s Transmission & Distribution Investment Plan until FY 2030.

As stated in the order, the NEPRA will select the terms of reference (ToR) for the third-party audit in addition to announcing the quarterly audit. A report on the company’s investment plan’s progress will need to be submitted every quarter.

A performance report would also be required under the investment plan by K-Electric, Karachi’s only power distribution utility, according to the statement. A secure mechanism to avoid electrical mishaps was also mandated by the authority to the utility.

In the meantime, the power distribution firm stated in a statement that the investment plan will boost the utility’s infrastructure to meet present and future demands, decrease transmission and distribution losses, and increase customer base growth.

With investments totaling Rs. 544 billion, KE has been able to more than halve its T&D losses and quadruple its customer base and power consumption since privatisation, according to the statement.

A hearing in March 2023 was held to inform stakeholders about the projects that KE management had planned for FY2024–FY2030, and the statement claimed that the plan had been presented in compliance with regulatory requirements.

In terms of investment areas including expansion, energy loss reduction, network rehabilitation, maintenance, and safety, KE claimed to have clearly defined priorities and projects for this era.

The plan calls for the construction of transmission lines and grids, which will increase the dependability of KE’s network and make it possible to take on more electricity from the National Grid.

In order to manage the city’s needs through targeted investments and tech-based interventions, CEO KE Moonis Alvi said, “We are looking to invest $2 billion in Transmission and Distribution over the next 7 years.” The work of all the stakeholders who have contributed to this trip and who will help us modernise our infrastructure and get ready for the future is something I’d like to acknowledge.

The investment plan is a supplement to the business’s Power Acquisition Programme, which outlines KE’s goal of having 30% renewable energy in its generation mix by 2030. As part of its efforts to provide everyone with access to reasonably priced energy, the firm has also been granted regulatory permission for its RFPs for 640 MW of renewable projects.

Business

$399 million in airline revenue is being blocked by Pakistan. IATA

Published

20 hours ago

Farwa

Pakistan and Bangladesh have been urged by the International Air Transport Association (IATA) to promptly release airline profits that are being withheld in violation of international agreements.

“Airlines are unable to repatriate over $720 million ($399 million in Pakistan and $323 million in Bangladesh) of revenues earned in these markets, resulting in a severe situation,” an IATA statement stated.

“Money-denominated expenses like lease agreements, spare parts, overflight fees, and fuel must be paid for in a timely manner by repatriating revenues to their home countries.”

Delaying repatriation raises exchange rate risks for airlines and violates bilateral agreements’ international commitments. In order for airlines to effectively continue to offer the aviation connectivity that both of these countries depend on, Pakistan and Bangladesh must immediately release the more than $720 million that they are blocking, according to Philip Goh, Regional Vice President for Asia-Pacific at IATA.

Pakistan needs to make the difficult repatriation procedure less complicated. According to the statement, this presently includes the need to present audit certifications and tax exemption certificates, both of which create needless delays.

Approximately 425,000 jobs and $2.8 billion in economic activity were supported by Pakistan’s aviation industry prior to COVID-19. Passenger numbers are predicted to increase by more than 2.5 times by 2040 after returning to pre-COVID levels in 2023, according to the statement.