Government seeks IMF approval for power tariff cut

On Monday, it is reported that Pakistan is approaching the International Monetary Fund (IMF) with a new plan that aims to lower energy rates by Rs6 per unit by contributing Rs2.8 trillion. However, finance experts said the plan is extremely risky, as the lenders might not instantly approve it.

The federal government informed IMF that the four federating units will contribute Rs1.4 trillion of the Rs2.8 trillion, however, KPK governed by Pakistan Tehreek-e-Insaf (PTI) has refused to fund the initiative.

According to Energy Ministry sources, both parties discussed Rs2.8 trillion rate relief reduction proposal over the weekend, but no final decisions were made. The IMF has requested further information, the sources added.

Despite the Prime Minister’s Office’s aggressive push, the finance ministry was hesitant to take up the responsibility of the initiative. Sardar Awais Laghari, the Minister of Power, was not available for comments.

Without K-P budget, all provincial budgets were already overstretched, and these governments might not provide funds to a project that would benefit the PML-N administration politically at the expense of the provinces.

By modifying the contracts of government-owned and local power producers, shutting down certain inefficient facilities, and paying off debt of Rs2.7 trillion, the government has planned to lower the price of energy by Rs5.80 per unit.

Sources revealed there is still no agreement between the Center and the four provinces, despite the Prime Minister’s Office meeting with some of the provincial stakeholders.

The government informed the IMF that the four province governments would contribute Rs1.4 trillion according to their respective stakes in the National Finance Commission (NFC). The Public Sector Development Programme (PSDP) would be further cut, additional commercial loans will be taken out, certain budgeted subsidies will be diverted, and the profits of government-owned companies will be withheld in order to finance the remaining Rs1.4 trillion.

“The K-P government will not consider any federal request of sharing power subsidy burden in monetary terms, Muzzammil Aslam, Finance Adviser to the K-P Chief Minister, told The Express Tribune. He added that and in return K-P residents and industries were paying Rs70 per unit price.

The K-P government is now disappointed with the Centre’s power handling and was now working on its own power projects, said the Finance Adviser. He said that the province would also make its own transmission lines and form IMF, regulatory authority to give cheap electricity to protect the K-P economy.

Muzzammil Aslam, Finance Advisor to the KP Chief Minister, said that “The KP administration will not take into account any federal proposal to split the financial burden of electricity subsidies.” He continued by saying that KP government is now concentrating on its own power projects in order to supply inexpensive electricity and boost KP economy. He further claims the province would also form its own transmission lines and create an IMF regulatory authority.