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Energy sector circular debt: Govt irked by 'twisted' facts, figures

  • Shaukat Tarin says he will talk to SBP governor as the need is to release disaggregated figures of public debt
Updated 08 Sep 2021

Islamabad: The government is reportedly disturbed due to dissimilar energy sector's circular debt figures being reported in the media. According to figures presented before the Cabinet Committee on Energy (CCoE) last month, circular debt reached Rs 2.280 trillion in FY2020-21 from Rs2.150 trillion in 2019-20, showing a growth of over 6 per cent in its flow.

However, on August 31, 2021, during a discussion in Federal Cabinet on CCoE's decisions of August 20, 2021, it was stated that there is a need to reconcile the figures of circular debt as conflicting figures were being reported by different agencies, which led to twisting of facts by the media.

Alluding to a misleading news item appearing in an English newspaper regarding public debt, Minister for Finance, Shaukat Tarin highlighted how figures released by SBP had been twisted to make the headlines.

"Since there were several constituents of public debt, the need is to release disaggregated figures of public debt by the SBP, for which I will talk to the Governor SBP," he reportedly stated.

Secretary Cabinet suggested that representatives of Information & Broadcasting Division should attend the meetings of the Cabinet Committees so that official press releases could be issued to avoid conjecturing by the media.

The key reason for the contained growth in flow of circular debt was payment of Rs90 billion to some Independent Power Producers (IPPs) excluding under Power Policy 2002 and appreciation in value of rupee till May 2021. In addition, the government also included Rs77 billion of Power Holding Company (PHL) in the national debt as per agreement with the World Bank, International Monetary Fund (IMF) and Asian Development Bank.

Energy sector circular debt shows contained growth in FY21

Initially, the government had projected total stock of circular debt at Rs2.327 trillion at the end 2020-21. According to the Power Division, the amount of circular debt was Rs1.612 trillion in FY2019, with the share of payables to power producers at Rs708 billion whereas Gencos' payables to fuel suppliers was Rs95 billion. An amount of Rs810 billion was parked in PHL.

In FY 20, total circular debt was 2.150 trillion, of which share of payables to power producers was Rs1.038 trillion, Gencos Rs 105 billion and amount parked in PHL was Rs 1.007 trillion.

In FY 21, total circular debt was recorded at Rs2.280 trillion, of which share of payables to power producers was Rs 1.245 trillion while the amount of Gencos was Rs9 billion; and payables to fuel suppliers was Rs105 billion. Amount parked in PHL was Rs930billion after Rs77billion of PHL were converted into national debt.

Expensive purchase of RLNG: Power Division suggests recovery of losses from consumers

Power Division has claimed that in FY 20, growth in flow of circular was Rs538 billion, which has reduced to Rs130 billion. According to Power Division, in FY 21, the following factors were key reasons for the growth in flow of circular debt: (i) unpaid subsidies- Rs57 billion; (ii) unbudgeted subsidies- Rs15 billion; (iii) IPPs interest charges on delayed payments Rs75 billion; (iv) PHL mark-up- Rs30 billion; (v) pending generation cost (QTAs+FCAs) Rs51 billion; (vi) non-payment by KE, Rs82 billion; (vii) Discos loss and inefficiency Rs67 billion; and (vii)Discos under recoveries- Rs27 billion.

Power Division has also claimed that unpaid subsidy including AJK and KE was Rs90billion in FY 21, whereas Rs294 billion is receivable from Karachi Electric (KE) as on June 2021 pending due to subsidy dispute between power utility and Finance Ministry.

Copyright Business Recorder, 2021

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