Govt certain on slashing circular debt to Rs130bln by June-end

ISLAMABAD: The government on Friday exuded confidence over its ability to bring down power sector’s circular debt to Rs130 billion by the end of the current fiscal year from the current Rs978 billion.

The power division’s spokesperson said the government took various measures, including tariff rationalisation, drives to recover outstanding bills, anti-theft campaign and system modernisation to contain technical and line losses.

“Due to these measures, the addition to circular debt is expected to be reduced to Rs130 billion in 2019-2020 compared to the target of Rs130 billion in the circular debt capping plan,” the spokesperson said, commenting on the current status of power sector’s circular debt, total liabilities and receivables.

The official said total circular debt, as per the definition by December 2019, stood at Rs978 billion, owed to both public and private generators, while the liabilities of PHPL (Power Holding Private Limited) payable to banks for loans taken in the past to pay generators stood at Rs804 billion, resulting in the total liabilities of Rs1,782 billion.

The spokesperson, however, denied that circular debt reached to Rs1.9 to 2 trillion. The power division’s official said circular debt at the beginning of September 2018 stood at Rs1.33 trillion. The debt was increasing at a rate of Rs38 billion a month.

“With the measures taken by the government, encapsulated in the circular debt capping plan, the power sector has considerably reduced the rate of increase to approximately Rs12-15 billion per month,” the spokesperson added.

“For the first time in the history of power sector, the sector has mobilised totally to fight against loss theft and corruption.” The spokesperson said the change didn’t take place in weeks, “but has been sustained for more than a year.

“We are confident that immense loss reduction, theft reduction and action against corrupt elements as well as improvement in infrastructure are leading to better service delivery to the common man and that we would fulfill the targets given in the circular debt capping plan,” he added.

Circular debt, involving the whole energy supply chain, continues to remain a specter that used to reemerge every now and then to haunt revenue streams of the sector. Unpaid bills to power generators bring production to halt and that led to adverse deficit-driven blackouts in the past. Foreign institutions have been pointing out this perennial anomaly in the power sector that is feared to put energy security of the country at risk.