Circular debt swells to Rs600bn

MUSHTAQ GHUMMAN

ISLAMABAD:  The country's inter circular debt has swelled to about Rs.600 billion due to the failure of the government to implement critical power sector reforms despite agreement with the international financial institutions, it is learnt.

Rs.280 billion of Discos debts were transferred to the books of Power Holding Company Limited (PHCL) which is paying interest to the banks in accordance with mutually-agreed terms and conditions.

According to official documents the estimated circular debt would be around Rs.350 billion in the current financial year with over Rs.30 billion (Rs.1 billion every day) added to the circular debt on a monthly basis on account of Tariff Differential Subsidies (TDS) and other cash flow issues including lower collection, late payment surcharge to IPPs, loss of fuel adjustment surcharge and high non-technical losses.

The documents further reveal that out of Rs.350billion TDS for 2011-12, Rs.50 subsidy is for the domestic sector.

Pakistan's power sector is running like an engine without a driver, commented former Minister for Industries and Production, Jahangir Khan Tarin, who is now a top reformist of Pakistan Tahreek-e-Insaf of Imran Khan.

Ministry of Water and Power has expressed its inability to ensure power supply to the consumers in January, February and March 2012 if sufficient funds are not provided to Pakistan Electric Power Company (Pepco).

The Ministry has admitted that the country is facing shortage of power during the current winter season mainly due to drop in the hydro-electric generation subsequent to canal closure and very little availability of gas and furnace oil for the thermal generation.

The generation capacity of hydro-electric power has fallen from 4,900MW (in November 2011) to 1,200MW in December 2011 due to lower water requirements for irrigation by provinces. While the demand is as high as 12,000MW, thermal generation is not capable of meeting the gap due to non-availability of gas for gas-fired units and low oil supplies to dual fuel operated (Gas+RFO) thermal units.

The Ministry has acknowledged that the IPPs are also either closed or not generating to their full capacity due to non-payment of dues. In January 2012 hydel generation has further reduced to 1,000MW. Normally, the situation improves in February when releases from dams increase and hydro-power generation is expected to touch 2,500MW. March 2012 will have the same average hydro-power generation.

The Ministry argues that in order to ease-out the current situation of severe shortages, enhancing current generation of 8,312MW, reducing the quantum of load shedding and controlling unscheduled load shedding more thermal generation needs to be added during January, February and March 2012.

Documents further disclose that the Ministry of Water and Power had sought Rs.175 billion for guaranteed power supply during three months, but the Federal Cabinet approved only Rs.25billion. In addition the Finance Ministry has not yet released the entire agreed funds.