Circular debt continues to swell despite Rs167bln payment

ISLAMABAD: Despite paying Rs167 billion, the monster of circular debt touched Rs2.28 trillion billion mark during the last fiscal year 2020-21 ending on June 30, 2021, The News has learnt.

The government claimed the pace of accumulation of circular debt has reduced significantly as it went up by “only” Rs130 billion in 2020-21 against a surge of Rs538 billion in financial year 2019-20.

The pace of accumulation was reduced by almost 75 percent in the last fiscal year 2020-21.

The monster of circular debt ballooned almost a trillion rupees in last three years as it stood at Rs1,612 billion in 2018-19, Rs2,150 billion in 2019-20.

A meeting of the Cabinet Committee on Energy (CCOE), held under the chair of Federal Minister for Planning, Development, and Special Initiatives Asad Umar on Friday, was told that circular debt increased to Rs1,245 billion in last fiscal year 2020-21 against Rs1,038 billion in 2019-20.

The payables to power producers stood at Rs105 billion in 2020-21 and the amount parked in Power Holding Limited (PHL) stood at Rs930 billion in 2020-21 against Rs1,007 billion in 2019-20.

The circular debt increased Rs297 billion in 2020-21 compared to a surge of Rs538 billion in 2019-20. But the government made payments of Rs77 billion through available fiscal space and another payment of Rs90 billion on PHL principal repayments so the stocks in circular debt decreased Rs167 billion. It increased Rs130 billion.

According to official statement issued after CCoE meeting, Petroleum Division presented the Draft Pakistan Oil Refinery Policy 2021 for approval of CCoE. The proposed policy was discussed in detail. Petroleum Division submitted the purpose of the policy was to attract investment in new deep conversion refineries as well as for upgrade of existing refineries. Members of the committee made a number of suggestions on the draft policy. It was decided that Petroleum Division would deliberate on the suggestions and re-submit the draft policy for consideration of CCoE in its next meeting.

Petroleum Division presented an update to CCoE on Pakistan Stream Gas Pipeline Project. The update included details of Head of Shareholders Agreement Terms, Funding Arrangements, Completion of Technical Studies and Regulatory Approvals. CCoE directed the Petroleum Division to ensure timely completion of various actions so that delays are avoided.

CCoE approved the proposal of the Power Division for eliminating the need for generation licences for small-scale renewable energy-based systems (up to 25 kW) for net metering.

The measure would greatly facilitate consumers who wish to install small-scale solar systems for their homes and businesses and avail the facility of net metering, the statement said.

Power Division also briefed the committee on issues hampering the progress of transmission line providing interconnection to 660 MW LEPCL Power Plant. The committee was informed that all the technical issues had been examined and resolved. The committee noted there were no restraining orders from any legal/regulatory forum regarding the execution of the project. The CCoE therefore, directed that the project activities be carried out without any delay.

Power Division also detailed the committee on the Circular Debt Report from July 2020 to June 2021. The committee noted that the circular debt build-up had substantially reduced in comparison to the previous year. The Committee appreciated the improvement in the recoveries and directed Power Division to continue with its efforts for reduction of circular debt.

The meeting was attended by Minister for Interior, Minister for Energy, Minister for Maritime Affairs, SAPM on Power, Petroleum & Revenue. Representatives of regulatory authorities and senior officials of Ministries/Divisions also participated in the meeting.