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Saturday, March 25, 2023

Standing Committee questions clarity of new surcharge

Standing committee on Thursday res­isted a government bill seeking powers to impose surcha­rge on electricity consumers under the new CDMP required by the IMF.

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With the country’s circular debt on the rise, IMF had sought a new Circular Debt Management Plan (CDMP) from the government, before entering a new program. This included a pledge to impose extra tariffs in the future, rationalization of subsidy, and slashing of circular debt.

Currently, Pakistan’s circular debt is hovering around $2.4 trillion, with a major portion of $1 trillion attributed to financing the power sector of Pakistan.

To implement the new CDMP, the government needs approval from the parliament and thus, the National Assembly’s Standing Committee on Power held a meeting yesterday to approve the bill.

However, the National Assembly Standing Committee on Power deferred the bill (“The regulation of Generation, Transmission, and Distribution of Electric Power (Amendment) Bill, 2020”), to the next meeting.

The bill is meant to empower the Federal government to impose a surcharge on different categories of consumers.

The money raised from this tariff would be used to retire the overburdening circular debt of the power departments and would be levied for funding any public-sector project to the extent decided ‘deemed of national importance’ by the Federal Government.

Read More: IMF to resume Pakistan’s stalled $6bn loan program

On this the MNA from Balochistan, Israr Tareen said that the people of his province were already struggling financially, and such a surcharge would make things harder for them.

To this, Secretary Power informed the committee that the Power Division is preparing a ‘Circular Debt Management Plan’ in consultation with Finance Ministry, according to which Rs. 60 billion on tubewells in Balochistan will be done away with by shifting tubewells to the solar system, and Rs. 212 billion will be “recovered” from KE.

According to the official documents, the committee commented that further transparency is needed on CDMP, and government needs to clarify the surcharge.

Briefing the NA panel, the Secretary Power Division said that an exclusive briefing would be given on the Circular Debt Management Plan, after presenting it before the Cabinet.

On the suggestion of the Committee, a provision was added that states that the aggregate amount of such surcharges shall not exceed ten percent (10%) of the aggregate revenue requirement of electric power suppliers owned or controlled by the Federal Government as determined by the Authority.

Read More: Will the resumption of IMF program harm or help the economy?

Chairman said that the money from the surcharge imposed should only be used to finance specific developmental projects of national importance, for example, the on-going Diamer Basha Dam project in AJK/GB, and other projects of national importance.

Secretary Finance, Kamran Ali Afzal, and Secretary Power, Ali Raza Bhutta were concerned with the inefficiency of the committee, as they realized that the government had pledged to show the committee’s approval to the IMF next week.