By Digital Spartans 
The federal government has informed the International Monetary Fund (IMF) that it plans to recover more than Rs. 110 billion in outstanding provincial power sector dues by adjusting the amount against provincial shares under the National Finance Commission (NFC) Award.
The proposed recovery mechanism was discussed during ongoing discussions between Pakistan and the IMF, with the lender raising concerns about the potential fiscal implications of the arrangement.
According to a report published by The Express Tribune, the federal government told the IMF that the Power Division and Finance Division had agreed on a mechanism to recover outstanding electricity-related payments from provincial NFC shares.
The move is linked to accumulated provincial electricity arrears that have remained a financial burden on the power sector. Government officials have reportedly reconciled at least Rs. 110 billion in provincial power sector dues.
Of this amount, the federal government is expected to recover nearly Rs. 50 billion in the near term under the proposed arrangement.
The National Finance Commission Award determines the distribution of financial resources between the federal government and provinces. Any decision to deduct power-related liabilities directly from provincial shares could therefore have an impact on provincial finances.
The federal government has previously considered using provincial NFC allocations to settle outstanding electricity dues. However, provincial governments have opposed such adjustments, creating a challenge for the implementation of the recovery mechanism.
The latest discussions with the IMF indicate that the federal authorities are once again pursuing a structured approach to recover the outstanding amounts.
Provincial electricity arrears have remained an important issue in Pakistan’s power sector because unpaid bills and accumulated liabilities can contribute to financial pressures across the energy supply chain.
Recovering the outstanding amounts could help improve the financial position of the power sector, but the proposed adjustment also raises questions about the fiscal resources available to provincial governments.
The IMF’s concerns reportedly focus on the broader fiscal impact of deducting the arrears from provincial NFC shares. The arrangement could affect provincial budget planning depending on the amount and timing of the deductions.
For the federal government, the recovery of these dues is part of wider efforts to address financial weaknesses within the power sector and improve fiscal management.
The issue is expected to remain part of discussions between Pakistan and the IMF as both sides examine measures related to public finances, energy sector liabilities and the distribution of resources between the federation and provinces.
Further implementation of the proposed mechanism will depend on the final arrangements between the relevant federal authorities and provincial governments, particularly given previous opposition to deductions from NFC allocations.