EDITORIAL: Once again the circular debt (CD) returns to the headlines and the government is as blank as ever about the fate of the electricity market that was going to finally liberalise the power sector, bring it up to speed with international best practices, and also do something about CD. After a number of stops and starts, it was finally booked to take off this April, yet so far there’s no word about it. Nor is there any update about how the implementation of the Competitive Trading Bilateral Contracts Market (CTBCM) model is going which will, according to Nepra, “have a direct positive impact on the economy in terms of boosting industrial activity”. It is designed to ensure not just power availability, but also affordability, “by taking into account principles of transparency, predictability, and accountability”.
But why isn’t there any word on progress? There is, however, plenty of information out there about how CD swelled to Rs2.358 trillion in the first seven months of this fiscal; mainly because of reduction in the amount parked at Power Holding Limited (PHL) and Gencos’ payables to fuel suppliers, but also because of a lot of inefficiency on the part of Discos, recorded at Rs48 billion during the said period against Rs7 billion in the same period of last year, a 586 percent increase. Still, despite the magnitude of the problem, the best any government can apparently do is blame previous governments for it and nobody takes the first step in the one sure way to begin solving this problem. And that is a forensic audit of IPPs (Independent Power Producers). This matter has been hanging in the air since the 2008-13 PPP (Pakistan People’s Party) administration put its foot down and called for one.
It was announced a few weeks ago that Energy Minister Hammad Azhar would hold “technical meetings with IMF (International Monetary Fund) on power-related issues including review of and update on CD flow, CD stock, and circular debt management plan (CDMP) implementation”. And while there’s been no update about this either, it is assumed that it will be part of the meetings with the IMF delegation that began on Friday. The Fund was clearly in a hurry about CDMP after EFF (Extended Fund Facility) was finally restored, and even squeezed a pledge out of the government to continue raising tariffs and cutting subsidies. So this might be one more thing about the PM’s recent radical relief plan that might not sit well with our one true lender of last resort.
Four years into the present administration, it can be safely said that it has been as unsuccessful, or perhaps unwilling, to solve the CD problem as any before it. To its credit, PPP at least called for a forensic audit of IPPs; although it’s another story altogether why it couldn’t get one carried out in its time. Still, there will be no meaningful progress without it; and IPPs will keep exploiting the state and getting away with it till one is done. If this government is really serious about solving the energy crisis, which it should be, then it knows where to start. It is no longer enough that every now and then government representatives sit down with known experts and spell out, in remarkable detail, all that needs to be done and then nobody does anything about it.
It ought to be lesson enough that this problem would not have grown into what it has become if only the right actions had been taken at the right time. It can only be hoped, then, that this administration will order that audit and turn the policy debate, finally, in the right direction.
Copyright Business Recorder, 2022
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