PD asked to clear KE’s TDS claims

Ministry of Finance (MoF) has urged the Power Division to clear Tariff Differential Subsidy (TDS) claims with all codal formalities in place to avoid late payment surcharge (LPS) and other issues of Karachi Electric (KE).

According to Finance Ministry, for the CFY 2021-22, Rs.56 billion has been earmarked on account of Tariff Differential Subsidy (TDS) KE under Power Division’s demand, whereas Rs.5.138 billion has been additionally provided to KE under the Prime Minister’s Relief Package of Rs.5/kWh, totalling Rs.61.138 billion. An amount of Rs.15.620 billion has been released by Power Division in the last 9 months leaving a balance of Rs.45.518 billion.

Finance Division maintains that due to non-issuance of KE’s pending quarterly adjustment since 2016 it was submitting provisional claims till June 2019. Keeping in view the liquidity issue of the power sector, Finance Division had released KE subsidy on provisional basis against the provisionally verified claims. However, from July 2019 onward, Power Division did not follow the mechanism/ procedure and Rs.10.482 billion were paid from the current year’s allocation on this account, despite the KE’s otherwise unacceptable claim of LPS on pending subsidy as is evident from Power Division’s demand of Rs.341.00 billion for KE’s TDS claims for FY 2022-23.

“As the Power Division has sufficient budgetary resources available for the remaining period of CFY 2021-22, therefore, it is requested to release pending claims, if any, with all codal formalities in place to avoid LPS and to prevent any additional implications on the public exchequer,” Finance Division said, adding that all necessary measures be taken to conclude all pending issues with KE.

Earlier, Karachi Electric refused to make any further payment to the Federal Government against electricity being supplied from the National Grid, saying the power utility has net receivables of over Rs 31 billion.

Chief Executive Officer (CEO) K-Electric, who also met Additional Secretary Incharge Power Division on Monday, argued that TDS receivables stood at Rs 320.825 billion as of February 2022 whereas stock of its payables was Rs 289.098 billion, showing a net receivable amount of Rs 31.727 billion.

“As evident from figures, KE has a net receivable of Rs 31.73 billion and therefore, the power utility is not obligated to make any further payments,” CEO said adding that KE despite being in net receivable position, was paying the amount for additional supply (over and above 650 MW) as a temporary arrangement with the understanding that the Power Purchase Agency Agreement (PPAA), Interconnection Agreement (ICA) and the TDS Agreement will be finalized and executed at the earliest in order to streamline the process for future. CEO argued that despite the lapse of almost 10-11 months, three agreements are yet to be executed between the parties. As a result of pending issues and exorbitant increase in fuel prices, KE’s borrowing for working capital/ general loan has reached an alarming level of Rs 133.437 billion which is unsustainable. Power utility has sought intervention of Secretary Power in the matter to expedite the process of approval and signing of Agreements.

“We also highlight that disconnection of additional supply will result in forced load shedding as KE will not be able to meet the demand and supply gap, in the absence of supply from national grid, which would impact the consumers of Karachi adversely and will also burden the national exchequer as KE would be operating comparatively expensive sources of generation to the extent possible which will result in additional tariff differential subsidy,” CEO KE added.

Replying to CEO KE, Power Division said K-Electric is also not making any subsequent payment against the additional supply from November 2021 to date and Rs. 61.690 billion has accumulated in this regard. Power Division further stated that it is a matter of great concern and is alarming that K-Electric is not fulfilling its legal and financial obligations despite its firm commitments.

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