The stage seems all set to pump in some more oxygen for the ailing energy sector. Islamabad, after rounds and rounds of meetings and moots, has only managed to agree to solve the pressing inter-corporate circular debt issue with - yes - you guessed it, Term Finance Certificates of Rs.82 billion.
Recall that TFCs of nearly similar amounts were offered thrice before during the tenure of the current government. And each time the promise was to eradicate the circular debt once and for all. Needless to say, it only acted as a short-term fix, and the problem continued to resurrect shortly after.
Unfortunately, circular debt kept growing (Rs.390 billion currently) - after brief periods of breathers - which is all what the TFCs have on offer. TFCs, this time around, will work no differently - they will bring some respite for a couple of months and the fuel supply situation to the power generation plants may improve and load shedding may well be kept in controllable limits.
The government would obviously not want to agitate the masses further in what is likely to be the last summer season before the general elections. Signing this cheque for the fourth time in a little over two years suggests that the tried and tested remedy is highly ineffective. The key issues will largely remain unaddressed, as the players in the energy chain won complain of the liquidity crunch for a brief while.
It would have been much better had the government focused more on reforms in the energy sector, by improving efficiencies in the base load public sector power plants, improving power sector infrastructure, showing more will to increase billing collection and rationalising tariffs amongst other things. Merely changing faces in distribution companies would remain futile unless more concrete measures are taken.
For the longer run, the energy mix has to be changed, without which, complete elimination of circular debt will remain a distant dream. Unfortunately, it appears that complacency will set in again in Islamabad and those at the helm of affairs will be content with TFCs as those engulfed in circular debt will remain relatively at peace in the short run. This very short sightedness has hindered any policy reforms in the energy sector and it seems the mess will continue to pile up once the effect of the painkiller recedes.
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