As the incumbent government has miserably failed to the circular debt issue in the last over four years, the new government will be inheriting billions of rupees worth outstanding of Independent Power Producers (IPPs). The present government, which could not resolve the circular debt issue, would pass on the burden to the new government, sources in the power sector told Business Recorder.
The government's default on 'sovereign guarantee' to IPPs has also negatively affected foreign investment in energy sector. Referring to a judgement of National Electric Power Regulatory Authority (NEPRA) about Suchal Wind Power, the sources said that foreign investors/foreign banks were now demanding high rate of return.
According to them, as the current government is completing its 5-year term, and the general elections are fast approaching, the interim government will have to deal with the acute power crisis responsibly by making all out efforts to stop circular debt from increasing any further. It will be too much to ask from the interim government to minimize the circular debt but by fully utilizing production capacity of efficient power plants, the government can at least make sure that the circular debt doesn't climb further up.
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 was Rs 14.095 against the fuel cost of Rs 21.04 of Gencos, which led to saving of Rs 6.94 on per unit during the said period. The saving on gas-based plants was Rs 2.36 per unit. However, the authorities did not use these IPPs at their full capacity and made Gencos run at 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 the sight. In the coming summer, the whole country will be facing huge power breakdowns as both the private and government power plants don't have required fuel due to heavy debts and shortage of money.
This prolonged issue has always been a big problem for every government in the past many years. For example, total circular debt in 2006, 2007, 2008, 2009, 2010, 2011, and 2012 was Rs 111.26 billion, Rs 144.99 billion, Rs 161.21 billion, Rs 235.65 billion, Rs 365.66 billion, Rs 537.53 billion, and Rs 872.41 billion, respectively. To the horror of the upcoming government, this debt will increase further. According to the sources, the severity of the situation can be gauged that at least Rs 453, 953 million is to be paid by Pepco to gas companies, oil companies, Independent Power Producers, Discos, and others. According to the break-up of these payables as on January 11, 2013, Pepco owed Rs 36,265m to Gencos on gas and Rs 15,344m to Gencos on oil.
Despite the fact that they are saving billions of rupees of the government by dint to good efficiency of their plants, the IPPs are suffering most due to this payment crisis on the part of the government.
The Pepco owes Rs 137,104 million to eight IPPs of WPPO run on furnace oil and Rs 43,561m to six IPPs run on gas. The six IPPs of CPPA 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.