ISLAMABAD: The country's energy sector circular debt reached Rs 2.28 trillion in FY 2020-21 from Rs 2.15 trillion in 2019-20, showing a growth of over 6 per cent in its flow. The key reason for somewhat contained growth in flow of circular debt was payment of Rs 90 billion to some Independent Power Producers (IPPs) excluding under Power Policy 2002 and appreciation in value of rupee till May 2021. In addition, the government also included Rs 77 billion of Power Holding Company (PHL) in the national debt as per agreement with the World Bank, IMF and Asian Development Bank.
Initially, the government had projected total stock of circular debt at Rs 2.327 trillion at the end 2020-21. According to the Power Division, the amount of circular debt was Rs 1.612 trillion in FY 2019, with the share of payables to power producers at Rs 708 billion whereas Gencos' payable to fuel suppliers was Rs 95 billion. An amount of Rs 810 billion was parked in PHL. In FY 20, total circular debt was 2.150 trillion, of which share of payables to power producers was Rs 1.038 trillion, Gencos' Rs 105 billion and amount parked in PHL was Rs 1.007 trillion.
During this period, Power Division raised Rs 200 billion from Islamic banks against assets of Discos and Gencos. However, the Auditor General of Pakistan (AGP), in its recent audit report claimed that the value of properties/ assets of Discos and Gencos was half their actual value.
Circular debt may hit Rs2.7trn mark
In FY 21, total circular debt was recorded at Rs 2.280 trillion, of which the share of payables to power producers was Rs 1.245 trillion while the amount of Gencos' payable to fuel suppliers was 105 billion. Amount parked in PHL was Rs 930 billion, because Rs 77 billion of PHL was converted into national debt. Power Division has claimed that in FY 20, growth in flow of circular was Rs 538 billion, which has reduced to Rs 130 billion.
According to Power Division, in FY 21, the following factors were key reasons for the growth in flow of circular debt: (i) unpaid subsidies- Rs 57 billion; (ii) unbudgeted subsidies- Rs 15 billion; (iii) IPPs interest charges on delayed payments; (iv) PHL mark up- Rs 75 billion; (v) pending generation cost (QTAs+FCAs) Rs 51 billion; (vi) non-payment by KE, Rs 82 billion; (vii) Discos loss and inefficiency Rs 67 billion; and (vii) Discos under recoveries- Rs 27 billion. However, there was negative prior adjustment of Rs 108.
Power Division has also claimed that unpaid subsidy, including AJK and KE, was Rs 90 billion in FY 21, whereas Rs 294 billion is receivable from KE as on June 2021 pending due to subsidy dispute between power utility and Finance Ministry.
In FY 21, Rs 31 billion was collected under Covid-19 installments. The recovery also included non-cash adjustment of AJ&K.
Copyright Business Recorder, 2021
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