Power sector continues to be a major hurdle between International Monetary Fund (IMF) and Pakistani authorities during policy-level talks as the former wanted subsidies to be restricted to100 units whereas the latter wanted this relief for lifeline consumers using up to 300 units. Sources said the government had prepared a comprehensive plan to phase out subsidies in medium-term and empower the regulator to notify single-weighted tariff after determination to allay Fund''s concerns that would be shared with it on Monday. An official privy to the discussion said that the IMF delegation led by Jeffery Frank expressed reservations on the power sector and sought a detailed plan from the economic team. The official said that power sector reforms remained a major concern of the IMF, but hoped that an agreement would reached on the issue as the government had formulated a plan to be shared with the delegation when the talks would resume on Sunday. The official said that a decision whether or not to submit a Letter of Intent (LoI) for a new programme would be cleared by Monday afternoon. Sources also claimed that senior officials of State Bank of Pakistan (SBP) had been able to alleviate IMF concerns on discount rate and Finance Ministry seemed to have convinced them that Federal Board of Revenue''s revenue target was achievable. Another official told Business Recorder on condition of anonymity that IMF questioned allocation of Rs 220 billion subsides for the next fiscal year, which were around 19 percent higher than the budgetary allocation of the current fiscal year. The official said that the IMF wanted the government to take tough decisions on power sector. Sources said the proposed plan included; (i) tariff structure may be rationalised and move towards full cost recovery in a manner that subsidies are phased out in the medium term except for the weakest of consumers; (ii) the CPPA may be allowed to take a consolidated tariff petition of all Discos with a weighted average tariff for approval by Nepra in the future. An appropriate amendment in Nepra Act/Policy direction may be carried to empower the regulator to notify a single-weighted average tariff after determination. Nepra announced tariff should be the tariff charged to consumers; (iii) Nepra may be allowed to move towards a system of multi-year tariffs with clearly defined adjustment mechanisms for variable costs such as late payment surcharge, higher losses than Nepra targets and interest payments. Nepra may determine fuel price adjustment on a forward-looking basis with adjustments in following months as required; (iv) FBR may charge GST on billed amounts but if those are not collected in six months, refunds should be made; (v) Pepco/CPPA should improve efficiency in the system through reduced T&D losses to Nepra targets in a prescribed time frame;(iv) Independent and fully functional CPPA should be put in place immediately to improve financial flow of the power system and CPPA may be empowered to collect payments from the Discos through formal and enforceable power purchase agreements (PPAs); (vii) An agreement should be reached with provinces for at source deduction of at least 70% of billed amount through the Federal Adjuster.
Posted on: Sun, 30 Jun 2013 09:05:54 +0000
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