The Council of Common Interests (CCI) in its meeting scheduled for April 28 will reportedly deal with the 5878 mw energy shortfall as an agenda item with the same proposal approved by the Cabinet last year--two weekly holidays and closure of markets at 8 pm--sources told Business Recorder. Total demand stands at 16003 mw, against generation of 10125 mw.
The power sector reforms, identified by the International Monetary Fund and agreed by the government as noted in its first Letter of Intent submitted on November 20, 2008 to the IMF Board, included a two-pronged strategy--increase tariffs, reduce losses/theft to achieve full cost recovery and elimination of the circular debt.
The government focused on raising tariffs (tariffs have been raised by 80 percent since late 2008) but failed to eliminate the inter-circular debt to date, which remains the single most potent contributory factor towards the current energy crisis as it has disabled the power sector from operating at maximum capacity. The blame for failure to eliminate the inter-circular debt three years after it took over control of the Ministry of Water and Power rests with the present government, analysts say.
Shaukat Tarin, when he held the portfolio of Finance, did attempt to deal with the inter-circular debt, first by issuing term finance certificates twice worth Rs 162 billion rupees to settle amounts Pepco owed to banks and suppliers, and establishing a power holding company (which took over a liability of 302 billion rupees).
The first TFC issued by the govt to settle part of circular debt of the energy sector was worth Rs 80 billion, issued on March 31, 2009. The second time, TFCs worth Rs 82 billion were issued on September 18, 2009 to resolve debt. However, these measures proved inadequate due largely to the government's failure to undertake corresponding reforms for example reduction in line losses, theft, corruption of meter readers as well as failure of several government departments/ministries to pay their dues.
The situation has worsened considerably since last year by over 2300 mw as the energy shortfall in the corresponding period last year was 3000 to 3500 mw per day "Circular debt impacts on the cash flow of each power sub-sector resulting in failure to pay for oil imports as well as to gas supplier," sources told Business Recorder.
The government has for the last three years dealt with the inter-circular debt by compelling the cash strapped Ministry of Finance to periodically release payments to the fuel supplier namely Pakistan State Oil. The current crisis was dealt with similarly with the President directing the Ministry of Finance to immediately release the necessary amount to enable PSO to pay fuel suppliers. The amount of Rs 15 billion was released on Monday as a short-term measure if past precedent is anything to go by. However, the money would be released to IPPs this time, and not PSO.
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