Extra subsidy needs: MoF asks ministry to allocate Rs50bn for PD to secure TSG
Recently, the Economic Coordination Committee (ECC) of the Cabinet approved allocation of Rs 50 billion from Public Sector Development Program (PSDP) to Power Division as subsidy to meet the Circular Debt (CD) targets agreed with the International Monetary Fund (IMF).
On May 5, 2025, Power Division briefed the ECC that the Prime Minister's Office conveyed to Power Division on May 13, 2024 to firm up a plan for off-grid solutions including solarisation of tube wells in Balochistan in the upcoming budget for FY 2024-25.
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Subsequently, consultative meetings were held under the chair of Minister for Power and Chief Minister Balochistan in which Minister for Commerce, Minister of State for Power, Provincial Ministers of Balochistan, Secretary, Power Division and Chief Secretary, Balochistan besides Power Sector specialists, participated.
The recommendations were presented before the Prime Minister during a meeting on February 2, 2024 wherein the forum was pleased to decide solarisation of about 27,000 agricultural tube wells through compensation of up to Rs.2.000 million for each tube well having legal electricity connection subject to disconnection from the grid. It was also decided that cost of providing part financing for solarisation of these tube wells amounting to approximately Rs.55.000 billion should be borne by Government of Pakistan and government of Balochistan at a ratio of 70% and 30% respectively.
Accordingly, a detailed Agreement, with implementation mechanism in the form of Standard Operating Procedures and a Steering Committee, was signed on July 8, 2024 by the Secretary, Power Division and Chief Secretary, Balochistan on behalf of respective governments.
Approval of the Cabinet was received on July 31, 2024. So far, the federal government has released an amount of Rs.14 billion through Technical Supplementary Grant (TSG) from the budgetary allocation of the National Food Security and Research Division under the Prime Minister's National Programme for Solarisation of Agriculture Tube wells in Pakistan.
The Power Division further briefed the forum that the remaining amount of Rs.24.5 billion is to be provided from the allocation under 'additional subsidy' for the power sector, as proposed by Finance Division. In this regard, it was highlighted that in order to achieve the revised CD flow target of Rs.337 billion by June 2025, Power Division needs to utilize the full amount of budgeted subsidies of Rs.1.229 trillion against the payables.
It was also highlighted that Federal Cabinet on July 8, 2024 approved reallocation of Rs.50 billion from PSDP to fund the additional tariff differential subsidy requirement.
This was also part of Rs 1.229 trillion allocated for power sector subsides. Accordingly, Power Division argued that presently the same amount can be allocated from the power sector budget allocation as proposed by the Finance Division. However, in case of any shortfall, the same amount should be remitted back to Power Division in June 2025 to meet the CD targets agreed with the Fund.
Power Division submitted the two following proposals: (i) direct the Finance Division to surrender Rs.50 billion from PSDP to lump provision for power subsidy in Demand No.45 of Finance Division as per Cabinet approval of July 8, 2024; and (ii) Technical Supplementary Grant of Rs.24.500 billion from the demand No.45 of Finance Division to Power Division Demand No.33 for implementation of the Solarisation of Agricultural Tube wells in Balochistan.
During the ensuing discussion, the forum was informed that the decision on solarisation was taken in July last year so the amount could not be budgeted and is being claimed now through TSG which should fully discharge the federal government responsibility of its share of the scheme.
Copyright Business Recorder, 2025
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