ISLAMABAD: Pakistan Electric Power Company (Pepco) has held Distribution and Generation Companies (Gencos) responsible for the ailments of the power sector due to which the circular debt is hovering around Rs 477 billion, well informed sources told Business Recorder.
"Power sector is facing severe financial crunch due to low recovery, Transmission and Dispatch (T&D) losses beyond Nepra targets and other inefficiencies within the distribution system, which are hampering the power sector as a whole with the circular debt rising to a mammoth Rs 477 billion," the sources quoted Chief Financial Officer (CFO), Pepco, Majid Alvi as saying in a letter to the federal government.
The CFO, according to sources, has emphasised that it is imperative to invoke financial discipline in all spheres of business affairs within the power sector, discipline that must be adhered to strictly, whereas the distribution companies and Gencos are not willing to improve the system, resulting in the power sector facing immense pressure to pay off its liabilities towards power producers.
Presently, Discos and Gencos are involved in procurement of bulk stocks without consulting the consumption pattern resulting thereby heavy capital investment in stocks.
"Each Disco and Genco should be asked to maintain stock levels keeping in view consumption patterns of at least the last one year. This would enable each Disco and Genco to avoid unnecessary blockage of funds, and the same can be utilised to pay off the power producers, the sources further maintained. It was further suggested that procurement of stocks should immediately be discontinued and only stock of emergent needs be procured. Financial and technical audit should also be introduced in bidding process to ensure transparency in procurement of stocks.
It was also recommended that each Disco should be advised to keep its losses within the Nepra defined targets. In case of higher losses, the distribution system should absorb these losses against the distribution margin, and ensure to remit the same amount to CPPA.
Presently, head of internal audit in each Disco is reporting to the Chief Executive Officer, which is contrary to the guidelines issued by SECP from time to time. "We have suggested that head of internal audit may be reportable to the audit and finance committee of each Disco and his performance evaluation report (PER) should also be written by the same committee. This would make the internal Audit Functions within the distribution system more efficient and effective, the sources concluded.
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