ISLAMABAD: With no respite in sight from power outages, officials in the finance and power ministries are toying with the idea of further increasing the electricity tariff and reducing subsidy on tubewells in Balochistan, besides improving recoveries, in order to create fiscal space for reduction in the circular debt.
The main factor which aggravated the circular debt was the wide gap between collection and the cost of power generation. This gap recently reached Rs20 billion a month and led to the piling up of the debt, which increased to an alarming level.
A senior official in the finance ministry told Dawn on Thursday that a decision had been taken to disconnect power supply to consumers failing to pay their bills for two consecutive months. Previously, this period was three months.
A first high-powered meeting on the circular debt and improving power supply was held on Thursday under the chairmanship of Finance Minister Abdul Hafeez Shaikh.
Minister for Petroleum Asim Hussain and Minister for Water and Power Naveed Qamar and Planning Commission’s Deputy Chairman Nadeemul Haq attended the meeting.
Finance ministry officials claimed at the meeting that all areas linked to circular debt had been identified and proposals were discussed to address the issue, including initiating a crackdown on those consumers who did not pay their bills.
The meeting was necessitated by the recent disruption in oil supplies by the leading oil companies seeking clearance of their dues. This resulted in reduction of thermal power generation and aggravated the overall production of electricity.
Dr Asim told Dawn that three steps had been identified to create fiscal space and help the government to reduce the circular debt.
There was a proposal to increase power tariff by five or 10 paisa and also to raise gas prices to create additional revenue.
The minister said the meeting also discussed proposals to reduce the Rs26 billion subsidy the government was paying on power supply to tubewells in Balochistan and Rs11 billion in Fata. The subsidised power supply in Azad Kashmir also came under discussion.
“We need to minimise these subsidises to a large extent.”
He said he had suggested that Wapda employees should be given subsidy in their salary in place of unlimited power supply.
He said the sector suffered a loss of Rs25 billion because of free supply of electricity to employees.
Finance Secretary Dr Waqar Masood told Dawn the government was also paying Rs7 billion a month as tariff differential subsidy. But he said that a series of meeting would be held to resolve the issues that had led to the piling up of circular debt.
He said the next meeting would discuss in detail the subsidies being given in Balochistan, Fata and AJK on power supplies.
A statement of the finance ministry said the meeting discussed measures to ensure the financial sustainability of the power sector.
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