Circular debt settlement plan hits snags

Power Division's circular debt settlement plan has reportedly hit snags as the Auditor General of Pakistan (AGP) is reluctant to conduct pre-audit of IPPs invoices make payment of Rs 80 billion, well informed sources told Business Recorder.
The undue delay on part of AGP may lead to shut down of power plants due to financial woes causing load shedding in summer season The economic coordination committee (ECC) had approved a circular debt settlement plan on March 7 and decided to immediately pay Rs 80 billion to power producers and fuel suppliers out of Rs 514 billion worth of dues aimed at easing their financial constraints.
However, a senior official of Ministry of Energy (Power Division) said that since the approval of debt settlement plan, the power division had approached auditor general of Pakistan to conduct pre audit of circular debt to pay Rs 80 billion to different energy firms. But auditor general was reluctant to conduct pre audit and was not responding to the power division. The present government had cleared Rs 480 billion in power sector debt in one go, this time around the Economic Coordination Committee (ECC) is more cautious and it will clear only the invoice-based energy cost. The auditor general that time had raised objection on payment of huge amount and said that it was released to the energy companies without conducting the audit of the dues against each company.
Official said that objection raised by auditor general had led to controversy and even National Accountability Bureau (NAB) had taken notice of the issue. This time, official said that power division wanted the auditor general of Pakistan to conduct pre audit of the dues but it was not responding to the division for last ten days.
Official said that auditor general was jeopardizing the debt settlement plan and delay in payment to power producers would lead to aggravating the load shedding situation in the country.
Official said that power plants were facing difficult situation due to circular debt. He said that after payment of Rs 80 billion, the government would be able to manage circular debt to some extent. He said that more delay in payment would lead shutting down power plants which would lead to increase load shedding in different parts of the country.
The Rs 80-billion debt will be cleared after obtaining loans from commercial banks and the cost of debt servicing will be recovered from electricity consumers through their monthly bills. The consumers will pay 43 paisa per unit to service the debt.
The circular debt totalled Rs 514 billion as of December 31,2017 which included Rs 312 billion in energy cost and the remaining Rs 204 billion was on account of capacity charges, liquidity damages and loan mark-up.
The Rs 480-billion circular debt payment of 2013 is currently under investigation at the National Accountability Bureau. A probe by the Senate Standing Committee on Finance has already established over Rs 62 billion worth of undue payments to the independent power producers (IPPs).