Payables to the power generators have crossed over Rs573 billion with Rs324 billion shortfall between the billed amount and recoveries of distribution companies during July-April 2018 of the current fiscal year.
Sources in the Finance Ministry said that the rise in gap between billed amount and recoveries has been causing serious financial problems for the power sector as payments to power producers are affected. They said that circular debt takes place mainly due to non-availability of required funds to pay the liabilities of power producers.
They further stated that it is important for all the stakeholders in power sector to fulfill obligations falling in their ambit for smooth functioning of the sector and to avoid resurgence of circular debt.
They added that heavy amounts are pending against AJ&K and all provincial governments as energy receivables of DISCOs are stuck up with the FBR as refund claims. Sources maintained if power sector received its arrears from DISCOs, the circular debt issue would not have aggravated.
Some of the main causes identified for circular debt included; (i) non-collection of full billing by DISCOs from consumers; (ii) non-resolution of payment issues of agriculture tube-wells in Balochistan and AJ&K; (iii) higher system losses than the determined by the regulator (NEPRA-National Electric Power Regulatory Authority); (iv) delay in issuance of tariff notification by the regulator; (v) payment of sales tax on billing basis to Federal Board of Revenue (FBR) instead of cash-basis (power sector companies are paying sales tax even on behalf of such consumers who are not paying their electricity bills); (vi) and non-payment of refund by FBR to distribution companies and recovery by FBR through coercive measures.
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