Subsidy to K-Electric consumers reduced 57pc to Rs25.5bn

KARACHI: The federal budget 2020-21 has proposed 57 percent reduction in subsidy to K-Electric consumers for the upcoming year to Rs 25.5 billion compared with Rs59.5 billion allocation for the current year.

Government has allocated Rs10 billion to pick up K-Electric’s tariff differential for 2020-21, which was fixed at Rs25 billion for current fiscal. Similarly, Rs5.0 billion are allocated for industrial support package compared with Rs10 billion in the current year, while Rs10 billion are allocated for subsidy to LNG sector for providing gas on lower rates, down from Rs24 billion earmarked for current year.

It may be mentioned here the Inter­national Monetary Fund (IMF) has been advising Pakistan to completely eliminate inequitable subsidy on electricity tariff and replace it with direct cash transfers to the deserving to lift them out of poverty.

In an environment of lower oil prices, subsidies were reduced by 1.5pc of GDP during this period on the back of increases in electricity tariff, introduction of surcharges and elimination of untargeted generalized subsidies for commercial, industrial and highest-volume residential consumers.

To recall, in February this year Pakistan had refused International Monetary Fund to immediately increase electricity tariffs due to an already double-digit inflation and unfavorable political conditions.

The government had assured the IMF that it would adhere to the overall circular debt reduction plan and annual revenue requirements goal despite delaying the notification, sources in the Ministry of Finance and the Ministry of Energy told The Express Tribune.

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