Restoration of stalled IMF loan programme

ISLAMABAD: The government is most likely to take the masses into confidence about the inevitable increase in power tariff by Rs3.30 per unit before December 31, 2020 to qualify for restoration of the stalled $6 billion IMF loan programme, a senior official of the Energy Ministry privy to the expected development confided to The News.

“Pakistan wants to revive the IMF programme which got stalled in February 2020 due to disagreement over additional tax measures and increase in electricity prices.

The main issue the government is facing is the fiscal crunch and there is an uphill task of debt servicing payments in future and Pakistan is now in the lurch and is left with no option but to go back to the IMF,” he said. The IMF wants, the official said, the government to get the Electric Power Act bill in the National Assembly passed enabling the government to pass on its cost of inefficiency and theft to the power consumers through imposition of surcharges.

“The government introduced the bill to this effect on June 10 but it has not yet been approved.

The proposed amendments are also aimed at timely notifying the increase in electricity prices to stop the build-up of the circular debt.”

However, as far as the increase in tariff by Rs3.30 per unit is concerned, he said, it is yet to be decided that the increase in tariff will either be in phased manner or in one go. It is up to the government to either pass the tariff increase on to electricity consumers in phased manner or in one go.

Out of Rs3.30 per unit increase, he said, Rs2.30 per unit is being increased in the head of the capacity payments of the new power plants added in the system and the remaining increase of Re1 per unit is being adjusted against the devaluation of Pak rupee against US dollar and energy cost.

The country will be having the new rebase tariff from January 1, 2021, with an increase by Rs3.30 per unit as the existing base tariff is based in 2017-18. And interestingly, there has been no increase in base tariff based on 2019-20.

The official said that the power sector has become unsustainable on account of circular debt that has reached Rs2.3 trillion. The existing capacity payments that currently stand at Rs850-900 billion will alarmingly swell to Rs1,600 billion by 2023.