Strong efforts required to tackle rising arrears of Power Sector: IMF

December 24, 2019 (MLN): On the completion of its first quarterly review, International Monetary Fund (IMF) highlighted that power sector is one of the areas where country needs to put strong efforts to improve the feasibility and to tackle rising arrears of the power sector.

Going into details provided by the report, at end of September, the stock of power sector’s arrears stood at Rs 1,690 billion which was about 4% of GDP, of which Rs 465 billion were accumulated in FY 2019.

The main contributors to these new arrears were technical and distribution losses, delays in updating tariffs, and provision of unbudgeted subsidies.To address some of the sources of arrears, the steps taken by the authorities included:

1. Investing in infrastructure to reduce technical losses.
2. Launching an antitheft drive and stepping up enforcement to increase collections.
3. Adjusting tariffs gradually to cost recovery levels, including on September 30, 2019 by around 5 percent, largely to recover arrears accumulated over FY 2019.
4. Budgeting or eliminating all power sector subsidies.

These efforts are already showing some results, with accumulation of new arrears falling from about Rs 38 billion/month in FY 2019 to around Rs 10 billion/month in the first three months of FY2020. The authorities remain committed to bring the flow of power sector arrears to zero by end-2023, the report highlighted.

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