ISLAMABAD - Power situation in the country might further deteriorate in the months to come, as Finance Division is reluctant to provide more subsidy to the power sector in remaining five months (February-June) of the current financial year 2012-13, it was learnt on Monday.
Country’s domestic power sector has consumed the entire budgetary allocation of Rs 185 billion in the seven months (July-January) of the ongoing financial year 2012-13. The total allocation of subsidy for the power sector for the whole year (July 2012-June 2013) on account of tariff differential was Rs 185 billion in the budget. Sources said that finance division has reportedly shown concerns over huge power subsidy given in the seven months and warned that further release of subsidy for power sector might balloon the country’s budget deficit.
Sources said that finance ministry has asked the ministry of water and power to review the power tariff and to control the line losses instead of seeking further subsidy in remaining five months of current fiscal year. The payment of outstanding dues by provincial governments, especially Sindh, and other public sector organisations, could ease the financial problems for the power sector.
“The country’s budget deficit will sharply increase if we provide further subsidy to the power sector in period between February to June 2013”, said an official of finance ministry while talking to The Nation on Monday. The government provided an average monthly subsidy of Rs 26.43 billion to the power sector, which was “simply unsustainable”. This subsidy is mainly financing the gap between generation cost and power tariff charged by the power companies from the consumers. At present the difference between power tariff is determined by the regulator and power tariff charged by the power companies.
The period between February and June is very difficult in terms of power supply subsequent to the change in weather in the country. The budgetary allocation of power subsidies which was Rs 185 billion have already been consumed in just six months and subsidies to be required to finance the tariff differential of the second half (January to June) period of the ongoing fiscal year 2013 would increase the budget deficit by around 1.0 percent of the GDP, economic experts believed.
The International Monetary Fund has recently shown unhappiness over huge subsidy given to the power sector during the ongoing financial year 2012-13. IMF team is of the view that budget deficit would get out of control if current pace of releasing funds for power sector continued in next few months. Sources said that IMF team said that power subsidy would go beyond Rs 300 billion at the end of June 2013 if current pace of releasing funds for power sector continued in next six months that would increase the country’s fiscal deficit. The government has target to keep budget deficit at 4.7 per cent of the GDP during current fiscal year.