PTI govt hints at raising power, gas tariffs

The federal government on Wednesday hinted at raising power and gas tariffs in phases over the next few years, The News reported.

Addressing a press conference in Islamabad, Federal Minister for Information and Broadcasting Shibli Faraz and Special Assistant to PM on Petroleum Nadeem Babar said the tariff increase was 'overdue' since the previous governments avoided it. Consequently, they claimed, the country's debt ballooned.

Faraz blamed the previous governments for not streamlining transmission and distribution networks and instead focusing on generation."We have the surplus capacity - for which we are paying billions of rupees in charges," he said.

Stressing that the previous government did not explore renewable energy, he claimed the PTI government brought down the use of furnace oil in the energy mix to 3% from 23%.

Babar said the premier had deferred an increase in power tariff due to the coronavirus pandemic. “In case of zero circular debt by December, the government had to pass on the impact to the consumers, but the premier disallowed it due to Covid-19”, he added.

Read more: Prolonged power outages sink mobile networks as KE struggles to restore electricity

That decision added Rs270 billion to our circular debt as the country was unable to meet International Monetary Fund (IMF) requirement to increase the power tariff in January. Consequently, the lending body is yet to release the third tranche of the bailout programme.

The inefficiencies of Power Distribution Companies (DISCOs) also lie in the range of Rs9 billion to Rs14 billion a month.

Babar said the PTI government had inherited circular debt from previous governments, including a budgeted amount of Rs146 billion not released under an industrial package.

The special assistant said exchange rate volatility added Rs200 billion to the debt.

On the North-South Pipeline project, Babar said work would begin February or March next year, adding that the PTI government was introducing 'holistic reforms' in that sector.

Babar said the government would not agree with the petitions filed by gas companies - Sui Northern Gas Pipeline Limited (SNGPL) and Sui Southern Gas Company Limited (SSGCL), contending the previous governments' decision to not allow an increase in gas tariff caused a shortfall worth Rs192 billion. He said the companies would be allowed to recover the receivables in the next four to five years in phases.

The special assistant claimed the country would not face gas shortage as the terminals are running at full capacity, however, consumers may face low pressure in winters.

The federal government is planning to import around 1,300-1,325 cubic feet of LNG to meet domestic needs. Meanwhile, the Sindh government has allowed work on 17 kilometre gas pipeline but formal approval from the provincial cabinet was awaited, he added.

Read more: Circular debt can rise from Rs2,219bn to 4,000bn by 2025

Circular debt

The country's circular debt in the power sector has risen to Rs1,601 billion. Posing another challenge to the sitting government, the Petroleum Division warned the Economic Coordination Committee, saying inaction will lead to the collapse of its otherwise profitable entities, causing a major disruption in the supply chain.

According to the summary sent to the ECC, many entities in the petroleum sector are on the verge of bankruptcy and they have been over-exposed to loans from the bank to run their operations, but their dues are not being cleared. The adverse impact of circular debt has badly affected the exploration and production activities of the state-owned companies. PSO, Sui Southern, and Sui Northern are facing the music because of non-recovery of arrears by the power sector.

The amount of circular debt of Rs1,601 billion includes the principal amount of Rs1,080 billion and mark up of Rs520 billion. Out of Rs1,601 billion, the circular debt of PSO (Pakistan State Oil) stands at Rs323 billion, OGDCL (Oil and Gas Development Company Limited) Rs401 billion, GHPL (Government Holding Private Company Limited) Rs113 billion, PPL (Pakistan Petroleum Limited) Rs378 billion, SNGPL (Sui Northern Gas Private Limited) Rs54 billion, SSGCL (Sui Southern Gas Company Limited) Rs293 billion and PLL (Pakistan LNG Limited) Rs39 billion.

The Petroleum Division also suggested a settlement of GDS (Gas Development Surcharge) payable by PPL on gas sales to GENCOs against the amount receivables by PPL from SNGPL while SNGPL to set off its receivables from the government on account of GDS against payable by SNGPL to PPL.