Uzair bin Farid

The Government of Pakistan will provide Rs310 billion in subsidies to independent power producers (IPPs) during the fiscal year 2023-24. The total budgetary allocation for subsidies during FY24 is Rs1.064 trillion, of which the highest amount will be utilised in subsidising the costs incurred by the Water and Power Development Authority (WAPDA) and Pakistan Electric Power Company (PEPCO). According to budgetary documents, the total allocation in subsidies for WAPDA and PEPCO is Rs579 billion, which represents more than half of the total budgetary allocation for subsidies. Of the allocated amount, IPPs will get Rs310 billion, followed by Rs150 billion for inter-disco (power distribution companies) tariff differential. Similarly, to make up for the shortfall in electricity revenue in Azad Jammu and Kashmir (AJK) based on tariff differential, Rs55 billion will be provided subsidies to the power companies there.

A subsidy of Rs25 billion will also be provided to the merged tribal districts of Khyber Pakhtunkhwa province in lieu of WAPDA receivables. K-Electric will also get subsidy to the tune of Rs315 billion. Of the total subsidy amount, Rs171 billion will be utilised in bridging the tariff differential of K-Electric, while Rs127 billion will be utilised in subsidising tariff differential arrears. A subsidy of Rs10 billion will be provided for tariff differential for agricultural tube-wells in Balochistan province, and Rs7 billion will be provided to K-Electric for the Industrial Support Package. A subsidy of Rs50 billion will be given to the Petroleum Division, where Rs29 billion will be used to give relief to domestic consumers through SNGPL (Sui Northern Gas Pipelines Ltd), and Rs12.6 billion will be used to support outstanding liabilities of Pakistan State Oil (PSO) and Attock Petroleum Limited (APL) in addition to other payables.

Pakistan Agricultural Storage and Services Corporation (PASSCO) will also get a subsidy of Rs10 billion, of which Rs3 billion will be used to subsidise wheat operations, and Rs7 billion will go for wheat reserved stock. Other subsidies include Rs35 billion for the Utility Stores Corporation of Pakistan, Rs6 billion for the import of urea, Rs25 billion for fertiliser plants, and Rs31 billion in additional subsidies to the flood-affected regions and people. The major part of subsidies that the government has decided to provide goes in supporting the power producers of the country. This indicates the inherent inefficiencies in the business models of these producers that they cannot run on profit on their own. Instead, the government has to prop them up through generous subsidies. This costs the government a lot of resources which could have otherwise gone into supporting other services of public interest.

Credit: INP-WealthPk