ISLAMABAD: The country’s power sector’s circular debt is reportedly touching Rs 2.6 trillion mark at present against Rs 2.252 trillion on June 30, 2022, posting a growth of Rs 303 billion in just the first four months of FY 2022-23, well informed sources told Business Recorder.
The main reason for the average monthly growth of Rs 75.75 billion in circular debt is the increase in base tariff, FCAs, and QTAs, less recovery by power Distribution Companies (Discos) especially in South Punjab, interior Sindh, Balochistan, some parts of KP and spillover of FCAs, the sources added.
The volume of circular debt, as per its definition was Rs 1.730 trillion but after addition of Rs 825 billion loans on the books of Power Holding Private Limited (PHPL) taken on behalf of Discos, total amount of circular debt stood at Rs 2.555 trillion.
KE’s payables are another main reason for a substantial growth in the circular debt.
According to sources, the incumbent government has already paid about Rs 200 billion to the power sector companies in recent months to minimise the level of circular debt, but it is still showing an abnormal growth.
The sources further stated that circular debt grew by Rs 185 billion during the first quarter of FY 2022-23 as compared to Rs 99 billion during the corresponding period of FY 2021-22. The total growth in circular debt was Rs 284 billion during the first four months of current fiscal year, excluding PHPL.
Another factor in the rise in the volume of circular debt is massive outstanding receivables of power Distribution Companies, despite recovery targets of over 100 per cent.
According to National Electric Power Regulatory Authority (Nepra), receivables of the DISCOs is one of the major issues highlighted by the regulator in the State of Industry Report (SIRs), determinations, etc., for the past several years. During FY 2020-21, the receivable amount of DISCOs including KE was around Rs. 1.398 trillion, whereas during the FY 2021-22 the receivable amount was Rs. 1.6804 trillion, showing an increase of Rs. 282.2 billion.
During FY 2021-22, the allowed T&D losses for the DISCOs were 13.41% whereas actual losses were 17.13%. Due to the difference of 3.72%, the financial loss on this account has been worked out at around Rs. 113 billion. In addition, Nepra determines the revenue requirement on 100% receivables.
During FY 2021-22 the receivable amount in terms of percentage was around 90.51% thus incurring the loss of Rs. 230 billion of the billed amounts. The overall impact on account of additional T&D losses and less recovery works out at Rs. 343 billion which contributes to the accumulation of circular debt.
The sources said that Power Division has revised its Circular Debt Management Plan (CDMP) in light of effects of floods on the economy including GDP growth estimates.
Copyright Business Recorder, 2022