January 15, 2024 (MLN): The government has introduced a circular debt scheme designed to cut the country's total circular debt of Rs5.5 trillion by one-third, contingent on effective implementation, Muhammad Ali, the caretaker Energy minister stated during a televised interview on Sunday.
"For the past three months, we have been focused on finalizing this scheme, and after in-depth analysis, it has been finalized," emphasized the minister.
The energy minister also informed that this policy will require approval from the Ministry of Finance, following which it will be submitted to the International Monetary Fund (IMF) for final authorization.
The country is grappling with a substantial gas tariff burden, with Rs2.9tr attributed to the gas sector and Rs2.6tr to the power sector out of the total debt.
To tackle this issue, the government raised the gas tariff in November. Since then, according to the energy minister, the debt has ceased to increase.
Going forward, Muhammad Ali highlighted that one of the major concerns of this high circular debt is the high burden of these interest payments which account for Rs1tr of the total debt.
Accordingly, this new scheme aims to further reduce the burden of these hectic debt payments and seeks to write them off as much as possible.
Secondly, GENCOs, DISCOs, and companies such as Pakistan State Oil (PSO) are suffering from a substantial accumulation of receivables which have now reached Rs500-Rs600bn, causing strain on their bank lines.
With the effective implementation of this initiative, these entities would be able to recover their receivables, and their financial health would improve and strengthen.
The Minister further addressed that the cross-subsidy amount is also significant, as every year the government provides a Rs600bn subsidy to the domestic sector, out of which Rs250bn is contributed by the industry.
Industries in the country are already suffering due to increased operational costs arising from higher tariffs. Given that gas is a relatively more economical option compared to electricity, industries have shifted towards its usage.
However, with the limited gas reserves, industries will experience instability in their operations.
Consequently, the country’s products would lose their competitiveness in international markets, exports would decrease, foreign earnings would fall and power tariffs would continue to rise in the future as it is dollar-based majorly.
Hence the solution to reduce the likelihood of increased power tariffs is to increase export earnings and for that industry needs to boost operations.
Another crucial benefit of this scheme is the adjustment of cross-subsidization has been adjusted.
“The goal is to provide electricity to the industry at 9 cents, compared to the current 14 cents, and this objective is deemed achievable,” the minister added.
With reduced electricity prices, the industry is expected to shift from gas, which would further be beneficial for the power sector.
The conversation further extended toward the outlook for DISCOs, where Muhammad Ali stated that the aim regarding DISCOs is to privatize them and it is their effort to take it to the privatization committee of cabinet next week once the Cabinet Committee on Privatization (CCoP) approves.
While answering a question about Saudi Arabia’s interest in the oil and gas exploration sector of Pakistan, the caretaker minister informed that the country is eager to invest in Pakistan.
“Now, it depends on us to present bankable projects, and maintain continuous coordination with them,” he further said.
The minister also revealed that certain teams have committed to coming to Pakistan, following the government's engagement in productive meetings.
Copyright Mettis Link News
Posted on:2024-01-15T12:44:12+05:00
42680
