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IMF wants to end tube wells subsidy as first review of $3bn deal is in progress

IMF wants to end tube wells subsidy as first review of $3bn deal is in progress

Business

Power tariff for other consumers has already been hiked to a record-high level

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ISLAMABAD (Dunya News/News Desk) – The International Monetary Fund (IMF) has presented another demand to Islamabad as it wants to remove the subsidy being provided to the tube-well operators across Pakistan and replace that with a permanent solution of providing solar panels.

Interestingly, the previous government under the then prime minister Shehbaz Sharif had already approved the project to solarisation of tube wells across the country for develop the agriculture sector and addressing the issues of rising energy costs and climate change.

The subsidy is meant to reduce the input cost for farmers using tube wells to irrigate their lands where the canal water isn’t available or remains in short supply due to various reasons.

Read more: KSE-100 Index over 54,000 for first time as investors see a successful IMF review

Other electricity consumers have already saw their tariffs skyrocketing amid the record-high inflation after the government was forced to meet the IMF conditions and deal with an ailing energy sector which is facing multiple challenges including a spiralling circular debt.

Last year, the government had slashed the base tariff for electric tube wells under the Kissan Package by Rs3.60 to Rs13 per kWh from Nov 1 to compensate farmers for the damage caused by the floods and heavy rains. However, the decision was later reversed with effect from March 1, 2023.

With the government already working on the project, one has to see whether the IMF wants to hike the power tariff for tube wells immediately or in 2024-25 – the next fiscal year or after the solarisation process is completed.

The estimated cost for solarisation of tube wells stands at Rs90 billion out which the Centre would provide Rs30bn while the provinces and the consumers contributing Rs30bn each.

Earlier, an IMF team had arrived in Islamabad last week for the first review of $3bn stand-by arrangement reached last year to check the progress made by Pakistan to meet the conditions set under the agreement, which were designed to reduce fiscal deficit.

It was previously reported that the IMF had asked the finance ministry to share the latest figures regarding the financial status of state-owned enterprises (SOEs) – clearly showing the Washington-based institution wants to expedite the privatisation process.

The government is already making progress on selling its stakes in the Pakistan International Airline (PIA) while it failed to attract any investors in the case of Pakistan Steel Mills (PSM) – the biggest loss-making SOE despite its closure since 2015.

 




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