The Ministry of Energy issued an urgent appeal to release 400 billion rupees in support by the end of December to prevent a slide in circular debt management, a key goal agreed with the International Monetary Fund. News I mentioned.
So far, the Finance Ministry has released only 82 billion rupees out of 1,229 billion rupees allocated for subsidies in the current fiscal year.
The Ministry of Energy warned in an official communication sent to the Ministry of Finance that failure to release funds by the December 2024 deadline could lead to breaching the agreed-upon goals.
Under the Circular Debt Management Plan (CDMP), the government has outlined a strategy that includes cost recovery, subsidy allocation, and privatization or concessional agreements for selected power distribution companies. However, delays in implementing the tariff adjustments agreed with the IMF in July 2024 increased support requirements by 125 billion rupees.
The fiscal year 2025 budget includes 1,229 billion rupees, equivalent to 1% of GDP, to support energy to address liquidity challenges. These funds are allocated for tariff differentials (Rs. 663 billion), arrears of FATA and K-Electric (Rs. 174 billion), payments related to circular debt, including milestone payments to the Power Holding Company (Rs. 24 billion) and arrears to power producers ( 358 billion rupees). ).
The IMF has described key reforms aimed at reducing costs and stabilizing circular debt. These include improving distribution efficiency, institutionalizing anti-theft measures, addressing bottlenecks in the transmission system, privatizing inefficient power generation companies, and renegotiating power purchase agreements, which currently account for 60% of generation costs.
