IMF Expresses Concern Over Delay in Revised Gas Tariff Notification for Captive Power Plants

The International Monetary Fund (IMF) has raised concerns over the government’s failure to notify revised gas tariffs for captive power plants. Sources told ProPakistani that the government has decided to issue the gas tariff notification retroactively from January 1, with plans to recover the dues accordingly. However, the IMF has warned that backdated notifications could lead to legal challenges. The IMF has demanded an immediate notification of the increased gas tariffs for captive power plants and urged the government to implement a grid transition levy for these plants without delay.  Additionally, the IMF has insisted that RLNG (Re-gasified Liquefied Natural Gas) should be sold to captive power plants at its import cost, and all subsidies provided to these plants should be eliminated. During discussions, the IMF delegation appreciated the government’s efforts to control the circular debt in the power sector. Sources revealed that the circular debt was expected to increase by Rs. 350 billion during the current fiscal year. However, over the past six months, the stock has been reduced by Rs. 10 billion, bringing the total circular debt to Rs. 2.38 trillion. Despite this progress, officials briefed the IMF that the circular debt is likely to rise further in the next six months due to increased electricity demand. By the end of the fiscal year, the circular debt is projected to grow by Rs. 40 billion, reaching Rs. 2.43 trillion. The IMF has requested a detailed report on the circular debt estimates. According to the briefing, the circular debt stood at Rs. 2.253 trillion at the end of the fiscal year 2022 and increased to Rs. 2.393 trillion by the end of the last fiscal year. Over the past two years, the circular debt has risen by Rs. 140 billion. Officials estimate that during the current fiscal year, the circular debt could increase by over Rs. 410 billion. To address the growing circular debt, the government is considering borrowing Rs. 1.2 trillion from banks. Sources added that Rs. 300 billion of this amount would be used for settlements, while approximately Rs. 600 billion in loans would be written off to clear the circular debt stock. The plan also includes imposing a surcharge of Rs. 2.8 per unit on electricity bills to recover the borrowed amount over five years. However, sources indicated that this plan is not yet finalized and will be subject to further discussions with the IMF. The government is expected to revisit the proposal with the IMF in the coming days to finalize the strategy for managing the circular debt crisis.