Issuance of Rs 82 billion TFC fails to resolve circular debt issue

The government has been unable to resolve the problem of circular debt despite issuing Rs 82 billion Term Finance Certificates (TFC) on September 11. An official informed this correspondent that the circular debt continued to adversely affect power generation capacity and was at present estimated at around Rs 375 billion and rising each day.
Sources in Ministry of Petroleum said that Rs 70 billion was provided to Pakistan State Oil (PSO) from Rs 82 billion generated through issuance of TFCs for onward payment to refineries and opening of Letters of Credit. A senior official of PSO said it was urgently in need of an additional Rs 10 billion for payment to international clients by September 28 and any delay would result in disruption of fuel supply.
He said that a request in this regard was sent to the Ministry of Finance but no response had been received yet. Sources in PSO said that non-payment of Rs 10 billion by the Ministry could result in serious fuel supply crisis for the power sector because more than 80 percent of the country''s requirement were met through imports from the Gulf region.
Officials of Ministry of Petroleum and Finance accused the Ministry of Water and Power of being responsible for the poor recoveries of power dues. They said that power sector losses had increased by more than 23 percent and are compounding the problem of circular debt and consequently increasing loadshedding.
According to them the problem of circular debt would remain unresolved without taking concrete measures to improve governance in the power sector. Ministry of Water and Power must reduce distribution and transmission losses to bring down the rising circular debt. The PSO has to receive Rs 166.88 billion from local clients, including Rs 62.94 billion from Wapda, Rs 67.05 billion from Hubco, over Rs 9 billion from Kapco, Rs 10.4 billion from KESC and Rs 1.25 billion from IPPs.
The company has to pay Rs 144 billion to local refineries and on account of letter of credit payments, which includes Rs 19.5 billion to Parco, Rs 1.72 billion to PRL, Rs 375 million to NRL, Rs 3.17 billion to ARL, Rs 1.35 billion to Bosicor and Rs 1.11 billion to others. It has to pay Rs 116.8 billion to the Kuwait Petroleum Company (KPC) out of which Rs 14.6 billion is overdue.