The federal government has announced that it will have to hike the power and gas tariffs in the country in a phased manner in order to enable gas companies to recover their receivables in the next four to five years.
“The previous [PML-N] government did not allow an increase in the gas tariff which resulted in an increase in the shortfall of the gas companies – Sui Northern Gas Pipeline Limited (SNGPL) and Sui Southern Gas Company Limited (SSGC) – by Rs192 billion.
“The companies will now be allowed to recover the receivables in the next four to five years in phases,” said Special Assistant to the Prime Minister on Petroleum Division Nadeem Babar on Wednesday.
He was addressing a press conference along with Minister for Information Shibli Faraz. During the presser he also shared some data related to power and gas sectors and negated the “negative impression” created by some recent media reports.
Explaining the causes of the increase in the circular debt to Rs270 billion, he said Prime Minister Imran Khan did not allow an increase in the power tariff due in January 2020 as per commitment with the International Monetary Fund (IMF) in view of Covid-19 pandemic.
Babar said the circular debt went up by Rs200 billion due to depreciation of the rupee against the dollar.
“Rs200 billion was added to the circular debt on account of exchange rate. The rupee was overvalued and the PTI government had to devalue it in order to bring to a real exchange rate.
“However, the PTI government did not increase the electricity rates due to the coronavirus pandemic that resulted in increase in circular debt by Rs270 billion.”
“Another cost which needed to be passed on to the consumers was incurred due to inefficiency of distribution companies (DISCOs) which are also causing a loss of Rs9 to Rs14 billion every month.
“In case of zero circular debt by December, the government had to pass on the impact of both these factors to the consumers. However, the prime minister disallowed this due to Covid-19,” he added.
He said the circular debt inherited from the last PML-N government also included Rs146 billion budgeted amount that was not released under an industrial package.
The SAPM said a subsidy of Rs3 per unit was given to the industrial consumers of power.
“The previous government had not allocated funds to give Rs3 per unit on electricity supply to the export oriented industrial sector that caused an increase in circular debt by Rs146 billion.
To a question, he said the federal government would not agree with the petitions filed by gas companies –SNGPL and SSGC – to pass on the shortfall of previous years to consumers.
He said there will be no shortage of gas in the country as both the terminals are running at the full capacity. However, consumers will face low pressure problems in winter. “The government is making arrangements to import around 1,300-1,325 cubic feet of the LNG to meet domestic needs.”
The SAPM said it is unfortunate that a negative media campaign is being run against the government about the LNG using fudged statistics.
He said the present government has imported 35 cargo ships of the LNG in the last 27 months at rates 20% lower as compared to the gas obtained through expensive LNG agreements signed by the previous government with Qatar.
“Our government imported LNG at an average 10.4% of Brent on spot rate as compared with 13.37% being imported under Qatar agreement,” he added.
Babar said the government has also allowed the private sector to construct LNG terminals in the country and two companies have shown their readiness to establish these facilities in Pakistan.
He said the last PML-N government had established two LNG terminals with a government guarantee to run these facilities. This, he claimed, tremendously increased the cost.
Regarding offering cooperation to the K-Electric, Babar said the government provided the LNG to the power generation company in Karachi in summer just to facilitate people of the country’s biggest city.
The SAPM said work on the North-South Pipeline will be started in February- March and holistic reforms are being introduced in the pipeline sector. Speaking on the occasion, information minister Shibli Faraz said the government is trying to control the issues of circular debt and line losses in the energy sector.