The country's circular debt has reached Rs 525 billion due to highly mismanaged power sector after top positions of public sector's power companies have been occupied by Power Ministry's officials, well- informed sources told Business Recorder. The circular debt piled up again after the government cleared Rs 480 billion soon after coming to power in June 2013 due to less recovery and high losses.
The power sector had borrowed Rs 41 billion in June 2017 to partially clear the circular debt when Independent Power Producers (IPPs) and Pakistan State Oil (PSO ), which supplies furnace oil to Hubco and Kapco, made a hue and cry. The current stock of Rs 525 billion is in addition to Rs 400 billion loans availed by the power Distribution Companies (Discos) and parked in the books of Power Holding Company Limited (PHPL). The company writes each month to the Discos to arrange interest payment as the companies are unable to pay principal amount to the banks.
Power sector receivables have also reached Rs 850 billion of which Rs 625 billion are to be paid by the private sector. The stock of receivables is increasing each passing day due to "ineffective" policies and appointment of ineligible officials at top positions. The newly appointed Federal Minister for Power, Sardar Awais Leghari is said to be taking decisions under the influence of those officials of the ministry who have occupied lucrative positions in the companies only due to their lip service instead of performance.
Prime Minister Shahid Khaqan Abbasi, who is just busy firefighting in energy sector, has directed the Ministry of Energy to overhaul power transmission, distribution and recovery processes of distribution companies (Discos) for cutting down inefficiencies, reducing administrative losses and to find a permanent solution to circular debt. Managing Director Pakistan State Oil, Sheikh Sheikh Imranul Haque informed the meeting that due payments of RLNG are increasing each passing day and the company is facing problems in opening of Letters of Credit (LCs).
The Prime Minister has directed for constitution of a high-level committee to find solution to the issue of circular debt. The committee will be led by the power minister and would include representatives of Ministries of Finance and Power as well as the Petroleum Division. The IPPs wrote a letter to the Prime Minister a couple of months ago and sought time to sort out financial issues but the Prime Minister did not give time.
Sources in power industry said that currently circular debt is around Rs 800-850 billion of which power sector owes Rs 300-350 billion to IPPs followed by Rs 350 billion to PSO and Rs 100-150 billion to gas companies and Oil and Gas Development Company Limited (OGDCL). However, Joint Secretary (Power Finance) Ministry of Power, when contacted, told Business Recorder that current stock of circular debt stands at Rs 441 billion.
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