Budget deficit targets unmet because of circular debt: official

The government's inability to resolve circular debt in the power sector is a major factor responsible for the failure to meet its budget deficit targets, sources told this correspondent on Wednesday. The government continued to extend massive subsidies to the power sector with Rs 76 billion subsidy released during the first two and half months of the current fiscal year with Rs 60 billion directly to the power sector and Rs 16 billion to the Independent Power Plants (IPP) subsequent to the directives of Supreme Court in the IPP case.
If this trend continued, the government would exceed the 2012-13 budgeted Rs 135 billion subsidy to Wapda/Pepco and Rs 50 billion to KESC by at least three times just like last year, an official said on condition of anonymity. The official said that Rs 25 billion was being provided to the power sector every month on account of subsidy against budgeted Rs 15 billion.
In addition, estimates of circular debt varied between various ministries and departments, as the circular debt among corporations was not routinely reconciled nor were the claims determined to be valid. A senior official of Finance Ministry said that the amount of circular debt was around Rs 300 billion after a payment of Rs 80 billion to the power sector through issuance of TFC in the current month. Officials in petroleum and water and power ministries gave figures ranging between Rs 375 billion and Rs 450 billion, respectively.
The Finance Ministry officials admitted that the reconciliation of circular debt was a major challenge and the issue could not be resolved even at the ministerial level committee constituted by the Cabinet Committee on Energy and the Finance Ministry had been paying huge subsidies to ensure uninterrupted supply of fuel to the power sector on the directives of political leadership.
The federal adjuster in Finance Ministry tasked by the federal Cabinet to reconcile the outstanding electricity amount against provinces was able to reconcile only Rs 7.4 billion after various meetings with the representatives of provinces and Distribution Companies. Provinces have reportedly challenged the claims of distribution companies, arguing that the billed amount was exaggerated. Additionally, he said that as much as Rs 180 billion was outstanding against the private sector.