Govt handing power sector over to caretakers with Rs380b circular debt

ISLAMABAD: The government has decided to hand power system over to the caretaker regime by limiting the circular debt up to Rs375-380 billion, and, incase, it exceeds more than Rs380 billion, the authorities will start feeling the heat and will be bound to go for loadshedding to avert the liquidity crisis in the system.

According to the top notch of the Power Division, the government, in first phase, released Rs80 billion out of which the hefty amount of Rs27 billion was paid to the banks in the head of servicing of the debt borrowed by the power sector and remaining Rs53 billion was paid to the (Independent Power Plants) IPPs, nuclear power plants and state owned Pakistan State Oil.

And in the second phase, the Power Holding Private Limited (PHPL) has borrowed Rs50 billion to further offload the circular debt and this amount has been disbursed to the various stakeholders of the sector. The Finance Ministry right now is in process of finalising the terms-sheet with some commercial banks for more loan of Rs50 billion and this amount will also be used to further slice down the circular debt.

More importantly, the government has paid to the IPPs the 87 per cent amount of their current arrears and more amount, they will have in the days to come. The payments to the IPPs will enable them to continue to produce the electricity on maximum capacity during the caretaker regime.

“We are hell bent upon to limit the circular debt up to Rs375-380 billion by May 31 and at this level the caretaker regime will not face any kind of liquidity crisis,” the official said.

When his attention was drawn towards the fact that the IMF, World Bank had earlier agreed with the authorities concerned on the figure of Rs325 billion arguing at that level, power sector will have no liquidity crisis, but the government is going to hand over the system to caretaker government with circular debt of Rs375-380 billion, the official responded saying that Rs325 billion figure has no more relevance to the system as the power generation of the country has now increased to over 29,000MW which is why, now the latest figure of Rs375-380 billion has been worked out, and, at this level, if the circular debt is contained, then there will be no cash flow problem in the system.