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Rs45bn to be injected into power sector

April 27, 2013

ISLAMABAD, April 26: Conceding that allocations for tariff differential subsidy were underestimated in this year’s budget, the government on Friday decided to inject another Rs45 billion and 150 million cubic feet of natural gas into the power sector to increase electricity generation by about 3,500MW before the May 11 general elections.

The prime minister’s adviser on finance, Dr Shahid Amjad Chaudhry, told a news briefing that the decision for bringing into use more generation capacity was taken by Mir Hazar Khan Khoso.

The adviser was accompanied by Water and Power Minister Dr Musadik Malik and Petroleum Minister Sohail Wajahat.

Amjad Chaudhry said the three ministries — finance, petroleum and water and power — had reached an agreement that about 1,500MW of power could be brought into the grid immediately and another 2,000MW could be added in about two weeks. This would reduce the current shortfall by over 75 per cent.

The current shortfall stood at about 4,600MW as the system was generating about 9,200MW against a demand of 13,800MW.

To achieve this, the Ministry of Finance would immediately release Rs10bn and another Rs35bn would be provided to the power sector on demand next month. About Rs20bn had already been injected into the power sector recently.

The adviser said the chronic issue of circular debt and shortages could not be resolved unless electricity rates were increased, but this was a major political decision which the next elected government should take keeping in mind various slabs and their socio-economic impact. “It was decision of the prime minister that the caretaker government would not touch electricity tariff,” he said.

Shahid Amjad Chaudhry said the government was contacting provincial governments to see if their electricity arrears could be deducted at source under the mechanism of the National Finance Commission while the National Accountability Bureau was also taking steps to improve recovery of outstanding electricity dues.

He said Petroleum Minister Sohail Wajahat had given a commitment to divert 150m cubic feet of gas from other sectors. If the promise were redeemed, it would help utilise about 1,100MW of additional capacity lying idle in independent power producers due to gas curtailment.

Mr Wajahat declined to explain from which sectors his ministry would cut down natural gas to divert to the power sector. He, however, said he would ensure that gas supplies were made on the basis of efficiency and hence it might not be helpful if he announced diversions in advance.

In reply to a question, finance secretary Dr Waqar Masood Khan conceded that tariff differential subsidy allocated in the budget last year at Rs120bn was on the lower side because it was assumed that there would be a substantial rise in tariff. But the assumption turned out to be wrong.

The secretary said the revised target at Rs291bn set by the previous government in the budget strategy paper before leaving office last month was still intact.

Amjad Chaudhry, however, explained that electricity demand could go up in coming days with a rise in temperature and hence raising the generation would remain a moving target and might leave substantial shortfalls.

Power Minister Dr Musadik Malik promised that the caretakers would do whatever they could to provide relief to people from the torment of loadshedding.

He said he had sought Rs150bn to increase electricity production, but was pushed back by the finance ministry because of its negative fallout on future government and increase in inflation. About 1,100MW of capacity in independent power producers could be utilised by providing about 4,000 tons of furnace oil per day purely on the basis of their efficiency with a capital injection of Rs10bn, he added.

Musadik Malik said the hydropower generation capacity was dependent on water requirements of provinces that were expected to improve next month as irrigation needs go up and provide cushion to generation of about 2,500MW of more electricity. However, the increase in electricity demand would offset this increase.

People ought to conserve energy for demand side management as supply side management alone would not help, the minister observed. He said the tariff structure was heavily flawed because the government was selling electricity at Rs2-6 per unit to various consumers, but it was purchasing it at Rs14-15 per unit.

He said the power sector required massive restructuring process to put the electricity system on a sustainable path, but as caretakers they could not take major decisions. However, they would leave behind a road map which if the new government wanted to implement would bring about a positive change.