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ISLAMABAD: The troubling energy sector’s circular debt has reached Rs2.358 trillion during the first seven months (July-Jan) of FY 2021-22 compared to Rs 2.331 trillion in corresponding period of 2020-21 due to reduction in amount parked at Power Holding Limited (PHL) and Gencos payables to fuel suppliers, well informed sources told Business Recorder.

However, growth in circular debt flow has been recorded at over 114 per cent to Rs 2.358 trillion as compared to Rs 1.1 trillion when PTI took over the federal government in August 2018 due to inefficiencies and incompetence at Discos’ level.

On March 7, 2022, Minister for Energy, Hammad Azhar will hold a technical meeting with International Monetary Fund (IMF) on power-related issues including review of and update on circular debt flow, circular debt stock, Circular Debt Management Plan (CDMP) implementation (including tariff adjustments, notably Annual Rebasing (AR) FY 22).

The sources said a growth of 11.5 per cent has been recorded in payables to power producers which have rose to Rs 1.4 trillion during July-Jan, 2021-22 from Rs 1.255 trillion despite the fact that the government paid a substantial amount to IPPs as per revised pacts.

The sources said Gencos payable to fuel suppliers have reduced to Rs 83 billion during the first seven months of current fiscal year from Rs 99 billion in the same period of the previous fiscal year.

‘Rs5 power tariff cut will be adjusted through budgetary reallocation’

The amount parked in the PHL has also been slashed to Rs 875 billion during July-Jan, 2021-22 from Rs 977 billion in corresponding period of 2020-21, showing a reduction of Rs 102 billion.

The sources said the flow in growth of circular debt has reduced to Rs 78 billion during the first seven month of current fiscal year from Rs 180 billion in the same period of previous fiscal year, which is over 56 per cent decline.

The stock of unpaid subsidies has reduced by Rs 83 billion to Rs 12 billion from Rs 95 billion during the first seven months of current fiscal year. However, the volume of unbudgeted subsidy touched Rs 1 billion during this period from negative Rs 10 billion in the same period last fiscal year.

The sources maintained that IPPs’ interest charges on delayed payments reached Rs 70 billion, against Rs 47 billion in comparable period last year, posting a growth of 49 per cent.

The volume of non-payment by K-Electric has reached Rs 79 billion during the first seven months of current fiscal compared to Rs 47 billion during the corresponding period of last year, posting a growth about 68 per cent.

The amount of Discos’ inefficiency was recorded at Rs 48 billion in the first seven months of current fiscal year against Rs 7 billion in the same period last year, showing an increase of 586 per cent.

Discos’ recoveries remained at Rs 79 billion during July-Jan 2021-22 of current fiscal year from negative Rs 27 billion. PHL mark-up has decreased to Rs 16 billion from Rs 37 billion.

The other adjustments including QTA+ FCA stood at Rs 119 billion during the first seven months of the current year compared to Rs 128 against in the corresponding period of previous fiscal year.

Other adjustments (prior year recovery, etc) declined to negative Rs 42 billion during July-Jan, 2021-22 from negative Rs 108 billion in corresponding period of previous fiscal year.

This implies that circular debt flow has increased by over 80 per cent to Rs 381 billion during July-Jan, 2021-22 from Rs 211 billion in corresponding period of FY 2020-21 on account different accounts. The unbudgeted subsidy including AJK and KE is around Rs 75 billion (AJK Rs 46 and KE Rs 29 billion). An amount of Rs 372 billion is receivable from KE as on Jan 2022 pending due to subsidy dispute between the power utility and GoP.

Copyright Business Recorder, 2022

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