As the previous government completes its 5-year term and the general elections are fast approaching, the interim government is gearing up to deal with the acute power crisis responsibly by making all-out efforts to stop circular debt from increasing any further. The country has 17,000 MW capacity to generate but currently it is being operated at 9,000 MW against the demand of 14,000.
The difference of 2,000 MW is understandable because hydel is not at full capacity but the rest 6,000 MW can be generated through making full payments to oil based plants and reallocation of gas from less efficient consumption to most efficient consumption.
It will be too much to ask from the interim government to minimise the circular debt but by fully utilising production capacity of efficient power plants, the government can at least make sure that the circular debt doesn't climb further up, said an official of an IPP. One way is to allocate the fuel to most efficient plants (oil and gas based plants both). It will save Rs 25 billion annually. Another important thing is to make payment in time and save the delayed payment charges amounting to Rs 28-30 billions annually.
Recently a report released by Planning Commission stated the way the power sector was governed in last five years. It explained the bad governance in the power sector entities, saying that all the power sector entities need to be run under corporate culture and then they should be sold out ensuring zero interference of the government. The performance of Discos and Gencos grossly deteriorated in last five years. The steps recommended by donors and lenders were never implemented with sincerity and commitment.
Sources at the Ministry of Water and Power said the previous government added enormously to circular debt just because of worst governance at top level by not following the rules. The economic order which list down the cheaper sources of power generation was not only criminally ignored but was also ridiculed by generating power from most inefficient plants adding to circular debt which ballooned to new heights in previous regime.
The data during the period from January to September last year shows that the per unit fuel cost of IPPs under 2002 policy on furnace based power plants stood at Rs 14.095 against the fuel cost of Rs 21.04 of Gencos. The per unit saving on gas based plants was Rs 2.36. However, the authorities did not use these IPPs to the fullest and made Gencos run to full capacity thus inflicting a huge loss on account of efficiency and eating up more fuel to generate as much power as IPPs would have made in less fuel.
If the interim government makes similar mistakes, a wave of complete chaos is in sight. In the coming summer, either the whole country will be facing huge power breakdowns due to gap in power generation and consumption or will add up to circular debt. This prolonged issue has always been a big problem for every government in the past many years. For example, in 2006 total circular debt stood at Rs 111.26 billion; Rs 144.99 billion in 2007; Rs 161.21 billion in 2008; Rs 235.65 billion in 2009; Rs 365.66 billion in 2010; Rs 537.53 billion in 2011; and Rs 872.41 billion in 2012.
The severity of the situation can be gauged from the fact that an amount of Rs 453.953 billion Pepco has to pay to gas companies, oil companies, Independent Power Producers, Discos, and others. According to the break-up of this payable as on January 11, 2013, Pepco owes Rs 36,265 million to Gencos on gas and Rs 15.344 billion to Gencos on oil.
Despite the fact that they are saving billions of rupees of the government through their efficient plants, the IPPs are suffering the most due to this payment crises on the part of the government. The six IPPs under 2002 policy run on furnace oil have bill of Rs 59,737 million and six of them run on gas and diesel need Rs 21,734 million to be paid by Pepco. In total, the Pepco owes Rs 284,897 million to IPPs, with 196,841 million bill of those power producers run on furnace oil and Rs 65,296 million running on gas. It also includes the bill of Rs 22,760 million of those power producers running on nuclear fuel.
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