Circular debt continues to haunt power sector

Pepco payables Rs302 bn, receivables Rs513 bn; loadshedding feared to increase in Ramazan

ISLAMABAD: Pakistan and International Monetary Fund (IMF) will kick off today (Thursday) in Dubai the three-day crucial discussion on energy sector with the monster of circular debt continuing to haunt the power sector as the payables of Pakistan Electric Power Company (Pepco) have swelled to Rs302 billion and its receivables reached Rs513 billion, the official sources told.

The Ministry of Water and Power’s top official Zarghum Eshaq Khan confirmed saying, “Pakistan and IMF will review the power sector and we are confident that the Fund people will get satisfied with the performance of the government in power sector as we are ahead of payables’ targets finalised in circular capping plan agreed with the Fund.”

“As of today we are supposed to be at the level of Rs352 billion in terms of payables but with better governance, the heap of payables have now been reduced to Rs302 billion. No doubt the menace of circular debt continues to affect the electricity generation supply side but the government is on its toes and ahead of the targets agreed with the Fund. We are bound to contain the flow that causes the surge in circular debt and reduce the stocks,” he said.

On the recovery side, the provincial governments (PGs) have also started paying the arrears of the electricity owing to which the cash flow situation has significantly improved.

The receivables that stood at Rs710 billion by March 31, 2016 have also plummeted to Rs513 billion as the Sindh government has paid Rs10-11 billion during the 6-7 months’ time out of the reconciled dues of Rs20 billion. However, the total electricity dues the government of Sindh owes is Rs67 billion out which Rs20 billion dues are reconciled and remaining Rs43 billion dues are in the process to get reconciled.

The government of Balochistan has also started paying the electricity dues and the remaining arrears stood at Rs2billion. Khyber Pakhtun Khuwa (KP), after the settlement of Net Hydel Profit (NHP) issue, has almost waived off the arrears. As far as the electricity losses are concerned the government has managed to bring down the losses by 1.6 percent to 17 percent from 18.6 percent.

“We will also share the electricity generation plan for 2016-17 with IMF in Dubai talks and the government will inject 2500 MW in next year. However, the electricity demand is also increasing by 2.5 to 5 percent every year which is yet to be assessed as to whether the demand is open or restricted.

However, the official sources said that the existing electricity demand-supply gap currently exists at 2500-3000 MW meaning by that the 6-8 hours load shedding will now continue that is feared to increase in the month of Ramazan (that will start in first week of June), July and August. In the peak summer the electricity demand is projected to increase close to 24000 MW but if kept view the mercury level that is abnormally at higher side in the current month, then the electricity demand is feared to spike to over 25000 MW. However, the maximum electricity generation hovers around at 18000 MW against the installed capacity of over 23000 MW. The government can generate electricity of 18000 MW at the maximum only when maximum hydro generation of 69000 MW is attained. Hydro generation of 4000 MW is currently being generated. This means that Industrial sector that is being provided zero load shedding will also become victim of power outages in the month of Ramzan to ensure the smooth electricity supply during Sehri and Iftari time.