47. Pakistan Economic Survey 2011-12 - Consultancy Services in ...

Pakistan Economic Survey 2011-12Box- 1Reforms of Present Government addressing Energy CrisesOil Sector ReformsThe Federal Government, in pursuance of its deregulation policy, has deregulated prices of Motor Spirit (MS), HighOctane Blending Component (HOBC), Light Diesel Oil (LDO), Jet Propellant 1 (JP1), Jet Propellant 4(JP4) and JetPropellant 8 (JP8) w.e.f. June 1 st , 2011. Refineries and Oil Marketing Companies (OMCs) are allowed to fix andannounce their ex-refinery price and ex-depot prices of above mentioned products on monthly basis. Under thederegulation framework POL prices have been linked with Pakistan State Oil (PSO) actual import price. In case ofnon availability of PSO import prices, the refineries will fix their ex-refinery price as per existing Import ParityPricing (IPP) formula.Gas Sector ReformsTo mitigate the gas shortage, government has designed different policies not only for exploration of new local gasreserves but also for import of gas like Liquefied Natural Gas (LNG) most mentionable are Liquefied PetroleumGas (LPG) Policy 2011 and Liquefied Natural Gas (LNG) Policy 2011.Coal Sector ReformsFederal and Provincial Governments are endeavoring to harness the huge coal resources of Thar by utilizing it as asource of energy for power generation through international investment.As part of promotional activity to increase the share of coal, the Government of Sindh has leased out a coal block foran integrated mining project to many companies like M/s Engro Powergen (Pvt.) Limited, M/s Cougar Energy UKlimited, M/s Oracle Coalfield Plc, UK, M/s Bin Daen Group, UAE and M/s China National Machinery Import &Export Corporation of China (CMC) for coal mining and installing coal-fired power plantPower Sector ReformsGovernment of Pakistan (GoP) initiated structural reforms in the power sector under the Power Sector Reform Plan(2010) finalized by Cabinet Committee on Restructuring (CCOR). Implementation of Power Sector Reform Plan2010 has been expedited and upgraded under the Power Sector Recovery Plan 2011. The plans are based on thefollowing key pillars: Improved governance structure: b) Supportive legal framework c) Financial sustainability;(d) Supply side management; (e) Demand side management and f) Promote private sector participation in the sector.Power Sector SubsidyThe timely payment of tariff differential subsidy (TDS) is being ensured along with subsidies for KESC and FATAon monthly basis. All subsidy claims till December 2011 (Rs.56 billion) have been disbursed. GoP started 2012 withno outstanding claims of TDS against any power sector company. For 2012, overall subsidy is estimated to be Rs.91– 125 billion. Monthly financial planning is being implemented for smooth financial flow. General Sales Tax (GST)exemption withdrawn for lifeline and agriculture consumers (Rs. 10 billion budgeted by GoP for 2012). GoP aims tophase out subsidies to power sector which have cost rupees one trillion in last 4 years.Resolution of Circular DebtCircular debt refers to the unpaid bills by Pakistan Electric Power Company (PEPCO) to key players especially Oilcompanies, Gas companies, Independent Power Producers (IPPs) and Water and Power Development Authority(WAPDA).194