LESCO Faces Rs2.23 Billion Loss After Government Rejects Subsidy Claims

In a critical financial development impacting Pakistan’s power sector, the Lahore Electric Supply Company (LESCO) has encountered a substantial loss of Rs2.23 billion. However, the LESCO rs2.23 billion setback and remedial measures loss is a direct result of the government’s refusal to honor certain subsidy claims, particularly concerning the zero-rated industrial rebate.

The details of LESCO’s significant setback were highlighted in the Auditor-General of Pakistan’s report for the 2022-23 audit year.

LESCO’s Subsidy Claims and Resulting Financial Discrepancy

The fiscal year 2021-22 saw LESCO claiming subsidies amounting to a massive Rs17.27 billion. However, the finance ministry approved and disbursed only Rs15.04 billion of this amount. The report brought to light that the reasons behind this denial of the remaining subsidy claims were not made clear.

Furthermore, there appeared to be no investigative measures undertaken to probe into this issue. This considerable financial gap has been attributed to LESCO’s non-adherence to the Public Sector Companies (Corporate Governance) Rules, which demand a strong internal control system.

Management’s Response to the Financial Shortfall

In November 2022, LESCO’s management was questioned about this significant financial discrepancy. The issue was then reported to the ministry in December 2022. In response, LESCO cited various reasons for the discrepancy.

These included errors in the calculation of fuel price adjustment and delays by the government in announcing concessionary tariffs for eligible customers at Sundar Industrial Estate. Notably, the Economic Coordination Committee (ECC) approved these tariffs in December 2021, but the implementation mechanism was still pending.

Audit Recommendations and Verification

The Departmental Accounts Committee (DAC), in December 2022, recommended a thorough verification of LESCO’s records to ascertain the exact nature of the loss. Additionally, the audit report highlighted a separate incident involving the Gujranwala Electric Power Company (GEPCO).

GEPCO reportedly suffered a loss of Rs244.25 million due to improper credit adjustments for industrial consumers under the industrial support package. In January 2023, the DAC directed GEPCO to have its records audited, aligning with the recommendations of the audit report.

Conclusion

The situation faced by LESCO and GEPCO reflects broader challenges in Pakistan’s power sector, particularly concerning financial management and subsidy allocations. The government’s role in timely disbursements and clear communication regarding subsidies is crucial for the stability and efficiency of power companies. The Auditor-General’s report underscores the need for stricter compliance with corporate governance rules and a more transparent and accountable system for managing public sector companies’ finances. As LESCO grapples with this substantial loss, the lessons drawn from this incident could pave the way for more robust financial practices in the future.