Power sector losses surge by massive 169pc in FY22

ISLAMABAD: The cash-bleeding power sector witnessed a staggering 169 percent increase in net losses during FY2022, rising to Rs320.778 billion from Rs119.3 billion in the previous FY2021. However, the more alarming aspect reveals that operating losses surged by 2064 percent, reaching Rs149.378 billion in FY2022 compared to Rs6.9 billion in FY2021.

These revelations are part of the Finance Ministry’s report titled “Federal Footprint State-Owned Enterprises (SOEs) Consolidated Report FY 2020-2022,” indicating that the power sector also carries Rs. 660 billion in subsidies (mostly tariff differential subsidies), which are not considered SOE support as they are intended for end consumers. Based on this report, it can be deduced that the power sector’s accumulated losses have reached Rs 930 billion, putting a burden on the national exchequer.

The report further emphasises that, despite revenue growth prospects, the sector’s operational margins and profitability remain areas of concern for the federal government. In FY2022, the sector reported a net loss of Rs. 320.778 billion, marking an exponential increase from the FY2021 loss of Rs. 119.304 billion, representing a substantial 169 percent further increase in aggregate loss.

The primary issues in this sector are billing under-collections, electricity theft, and transmission and distribution losses in old infrastructure, leading to declining profitability. Distribution companies (DISCOs) notably contributed to this loss, reporting a net loss of Rs375.582 billion in FY2022, primarily driven by operating losses at 16.3 percent, proportionally increasing with revenue increments. Addressing this situation requires concerted efforts to enhance electricity bill collections, curtail line losses in transmission and distribution systems, and combat electricity theft to improve the sector’s financial performance. Subsidies amounting to Rs. 660 billion were granted to the power sector in FY22, mostly on account of inter-DISCO Tariff Differential.

The report also highlighted the top ten loss-making commercial entities, including the National Highway Authority (NHA), which posted a net loss of Rs168.5 billion, Peshawar Electric Supply Company (Rs102 billion), PIA (Rs97.5 billion), Tribal Electric Supply Company (Rs21.147 billion), Multan Electric Supply Company (Rs22.814 billion), Sukkur Supply Company (Rs 29.484 billion), Lahore Electric Supply Company (Rs30.216 billion), Pakistan Railways (Rs47.486 billion), Hyderabad Electric Supply Company (Rs54.409 billion), and Quetta Electric Supply Company (Rs76.419 billion).

The top ten profit-making entities included Oil and Gas Development Company, which posted a net profit of Rs133.784 billion; Pakistan State Oil, which earned Rs86.233 billion; Pak Arab Refinery, which earned Rs68.718 billion; Pakistan Petroleum Limited, which earned Rs54.5 billion; National Power Parks Limited, which earned Rs33.3 billion; the National Bank of Pakistan, which earned Rs30.9 billion; Port Qasim Authority, which earned Rs22.145 billion; Govt Holding Pvt Limited, which earned Rs21 billion; Water and Power Development Authority, which earned Rs19.4 billion; and National Transmission and Dispatch Company, which earned Rs16.5 billion.

The “Federal Footprint, Consolidated SOE Report FY2020-2022” has been divided into two parts. Part-I includes 88 commercially operated SOEs, out of which 71 are registered under the Companies Act 2017, whereas the remaining 17 are governed by special enactments. Similarly, Part-II of the report consists of 45 non-commercial SOEs, mainly not-for-profit social sector development entities.

The commercial SOEs portfolio significantly contributes to the national economy in terms of corporate taxes, dividend payments, and employment opportunities for the general public. In the sectoral analysis, the financial sector, comprising banks, insurance companies, non-banking financing companies (NBFCs), and development financial institutions (DFIs), witnessed substantial growth and transformation in FY2022. Sector assets reached an impressive Rs8.9 trillion, showing consistent growth over the last three fiscal years. Revenues surged to Rs614.648 billion, registering a 31% increase from the previous fiscal year. Net profits soared to Rs72.569 billion, reflecting a remarkable 46.5% year-on-year increase. Notably, the banking industry played a pivotal role in this growth, contributing significantly to both profits and corporate taxes, exemplifying a sectoral shift towards enhanced profitability and economic contribution.

With an asset base of Rs7.983 trillion, the Infrastructure, Transport, and Communication (ITC) sector stands as the second-largest among state-owned enterprise sectors. While the sector showcased remarkable growth, spearheaded by the National Highway Authority (NHA), its employment figures dipped to 117,028 individuals due to reductions in Pakistan International Airlines’ (PIA) workforce. Despite substantial 38% revenue growth, the sector grappled with a net loss of Rs. 294.500 billion, emphasising challenges in balancing socio-economic goals with operational efficiency. Notable improvements in subsectors like ports and shipping and communication indicate the potential for sectoral recovery and efficiency enhancements.