Rs441 bn circular debt to cause power outages

ISLAMABAD: The government has entered 2018 with monster of circular debt of Rs441 billion in power sector which is destined to create the cash flow situation in future that will result in power outages not because of the non-availability of power but because of the liquidity crisis, top officials at Power Division told The News.

According to Zargham Eshaq Khan, joint secretary (power), the circular debt stands at Rs441 billion; however, the relevant mandarins claimed that circular debt has swelled to over Rs520 billion. The loans and liabilities of over Rs400 billion of power sector have been parked in PHPL (Power Holding Company Limited) and if the PHPL loans are included then the circular debt factually stands at Rs920 billion. The power sector receivables have surged up to Rs850 billion.

No doubt the incumbent regime has added so far 7,500 MW of electricity in the system and by next summer the new addition of electricity will go up to 11000MW. So there will be no load shedding on account of electricity supply dearth, but countrymen may face the curse of outages in the wake of liquidity crisis being emerged out of unbridled circular debt.

The government in 2013 at the very outset of its tenure retired the then circular debt of Rs480 billion, but on account of the bad governance and failure in recovery of billed electricity amount, the circular debt has again emerged and will continue to haunt the new government after polls.

According to the documents available with The News, the government is supposed to pay the overdue amount of Rs218 billion of IPPs (independent power projects), Rs279.4 billion to Pakistan State Oil (PSO).This situation has irked the incumbent federal minister for power Mr Awais Leghari. Meanwhile PSO’s economic miseries have further multiplied as its receivables have touched new high of Rs321.5 billion exposing the entity to liquidity crisis.

According to the PSO financial sheet showing payables and receivables as of January 1, 2018 power sector owes Rs279.4 billion to PSO, PIA Rs15.8 billion and Sui Northern is needed to pay Rs16.5 billion. The financial sheet shows that another trap of circular debt is being emerged for PSO because of LNG sector.

As of today, PSO has placed its demand with Finance Ministry seeking the immediate release of Rs60 billion to retire the current letter of credits (L/Cs). The financial sheet of PSO also unfolds that power sector on account of delay in making payment will have to pay mammoth amount of Rs70.6 billion in the head of late payment surcharge. Though the regulator (NEPRA) has accommodated the inefficient power sector by increasing the permissible losses up to 16.2 percent and allowing the passing of the bad debt and capacity charges to the consumers, yet the power sector is not sustainable to thrive because of inefficiencies.