ISLAMABAD: Water and Power Development Authority (Wapda) has asked Central Power Purchasing Agency-Guaranteed (CPPA-G), an arm of Power Division, to clear its outstanding dues of Rs 221 billion as the entity is facing severe financial constraints, sources close to Member Finance Wapda told Business Recorder.
On April 8, 2020, Wapda, in a letter to the Power Division highlighted a substantial rise in receivables from Central Power Purchasing Agency-Guaranteed (CPPA-G) and the status of implementation of the directives of the Supreme Court of Pakistan in which Power Division was to finalize payment schedule of receivables at the earliest and also release funds so that construction of two dams is not hampered or delayed.
The upward receivables trajectory continues unabated and has now reached a staggering amount of Rs 221.019 billion with details as follows ;(i) energy receivables- Rs 107.968 billion; (ii) NHP payable to Wapda for already serviced NHP loans - Rs 27.407 billion and; (iii) NHP payable to provinces - Rs 85.644 billion (KP, Rs 36.840 billion and Punjab, Rs 48.804 billion).
CPPA-G in June, 2020 released an amount of Rs 15 billion to Wapda out of the Rs 200 billion raised through Sukuk against demand of Rs 20 billion which was urgently required to pay off commercial loan of Rs 17.5 billion and markup to ABL as Wapda had to arrange funds to service the loan on due date of June 30, 2020. This shortfall has further compromised Wapda's capacity to absorb financial shocks and meet contractual obligations.
Wapda provided Rs 37.4 billion of cheap electricity units to the national grid which helped the country in overcoming load shedding and keep the basket tariff at a manageable level. The persistent build-up of receivables by CPPA-G is eroding Wapda's financial capacity to carry out O&M, servicing its debt payment and provide equity for development of projects.
"Wapda has requested Power Division to direct CPPA-G for immediate clearance of its outstanding dues of Rs 221.019 billion enabling the entity to meet its operational and development needs," the Wapda official was quoted as saying.
The country's power sector is facing a massive rise in circular debt which has crossed Rs 2.2 trillion of which contribution of currency depreciation has been calculated at Rs 190 billion in FY 2019-20. The efforts of incumbent government to curtail it have not yet produced the desired result.
According to the World Bank Pakistan's power sector has swallowed Rs 5 trillion ($ 45 billion) of national exchequer due to poor performance of Discos and other factors during the last ten years (FY 10-FY 19).
Power sector incurs annual losses of approximately 2.2 per cent of GDP on account of (i) high costs of power generation;(ii) losses accumulated from unfunded public policy mandates and lack of timely revision of tariffs ; and (iii) poor performance of electricity Distribution Companies (Discos). Almost half of the annual deficit in the sector is covered by federal budgetary subsidies.
The inefficiencies in Discos are also a major cause of circular debt and high electricity prices. These inefficiencies include high system losses ( including theft), misbilling and under collections. In FY 19, the average system losses of Discos were 17.7 per cent while Nepra had allowed 15.5 per cent losses to be passed on to the consumers. The differential contributed Rs 37 billion to the circular debt. Another Rs 116 billion was added to the circular debt as Discos collected only 91 per cent of billed amounts.