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Pakistan faces IMF today with more inefficiencies in power sector

"We are going to sensitise the IMF today about the plight of power sector,” Zargham Eshaque Khan, Joint secretary (Power) in Power Division, confirmed to The News saying that plan to get rid of the circular debt will be shared with IMF.

By Khalid Mustafa
November 13, 2018

ISLAMABAD: Pakistan is to face IMF today (Tuesday) with more inefficiencies in power sector with less recovery, no let-up in line losses and electricity theft and more surge in receivables that have contributed to jack up to ever biggest circular debt of Rs1.531 trillion.

“Yes, we are going to sensitise the IMF today about the plight of power sector,” Zargham Eshaque Khan, Joint secretary (Power) in Power Division, confirmed to The News saying that plan to get rid of the circular debt will be shared with IMF. He said that payables of the power sector currently stands at Rs996 billion, and the loans and liabilities of power sector borrowed by the Power Holding Company Limited (PHCL). However, these figures are yet to be verified by Pepco (Pakistan Electric Power Company) and will be updated prior to the meeting with the Fund. Mr Khan said that receivables of the power sector have increased to Rs898 billion.

The IMF mission will be told about the government resolve to trim down the circular debt as plan has been carved out with the help of provincial governments under which the crackdown against the outlaws involved in electricity theft has also been kicked off. The operation in the first phase to this effect has already been started from Punjab.

According to the circular debt capping plan earlier agreed with the IMF in September 2015, Pakistan has already defaulted the IMF targets set for three years from 2018 to 2018. As per target set with Fund in 2015, the government was to scale down the payables to Rs212 billion, which has now increased to Rs996 billion. The official said that the circular debt is increasing by Rs30-35 billion per month

The IMF will be told that main contours of the plan to erase the menace of circular debt that include the reduction of the line losses by one percent each year by scaling down to 13.2 percent from existing 18.2 percent and improvement of the recovery of billed amount of electricity by one percent annually from existing 89-90 percent to 95 percent.

More importantly, the permissible losses will also be cut down by 3 percent to 13.3 percent from 16.2 percent in five years’ time, and this will provide respite of Rs36 billion to masses. In last year, the power sector, the official said, alone suffered huge setback of Rs114 billion losses on account of more than 10 percent loss in recovery of billed amount of electricity. In the head of line losses, the system every year braves over Rs24 billion. However, the electricity consumers have been paying over Rs36 billion every year additionally when permission losses in the tariff increase to 16.3 percent from 13.2 percent to finance the losses inefficiency power sector has.

According to the documents, in the head of huge line losses, the electricity of about Rs60-70 billion is stolen every year by the unscrupulous elements. To ward off the loss that power sector sustains in the head of electricity theft, the Discos, in a year for two times at least, are said to be involved in sending the inflated bills to the consumers and through the overbilling, they collect over Rs35 billion every year.

More importantly the running defaulters and permanently disconnected consumers are need to pay Rs400 billion, and, if the government manages to pluck this low handing fruit, it can easily be able to scale down the volume of circular debt to a reasonable level.

The official said that the government has embarked up massive crackdown against the unscrupulous elements involved in stealing the electricity and to this effect, operation has been started from Punjab province and this it will be extended to other provinces. The Provincial governments have already been asked to cooperate with the respective top managements of the electricity distribution companies (Discos).