Ministry of Water and Power: Aware of lower circular debt but unaware of how much

Secretary says situation has improved on account of better bill recovery, fails to provide firm figures.

ISLAMABAD:

While it failed to give updated and firm figures to substantiate the claim, nevertheless the Ministry of Water and Power said that circular debt has shrunk significantly due to improvement in the collection of electricity bills.

During a meeting of the Energy Resource Rationalisation Committee, Secretary Water and Power Nargis Sethi reported improvement in recoveries but could not share a firm figure with the committee’s chairman, Finance Minister Ishaq Dar. She reportedly told the committee that provisional collection suggested significant improvement.

The committee has been constituted by Prime Minister Nawaz Sharif.

According to an official handout of the finance ministry, Sethi told Dar that circular debt has further been reduced to a level of Rs238 billion which was stuck at Rs295 billion a few weeks ago.



According to officials who attended the meeting, the Rs238 billion was an old figure which the government released a few weeks ago. Sethi said that she was planning to hold a meeting with the power distribution companies (DISCOs) shortly to discuss improvements in the billing cycle. She assured that all available resources will be utilised to make a comprehensive collection model.

The finance ministry has already refused to pick the power sector losses on account of less recovery of bills, which is one of the reasons behind the vicious cycle of the circular debt. It has been paying dues only to the extent of cost difference between the price of generation and end-consumer.

While the ministry of water and power claimed improvement in collection, the overall gross receivables of the power sector have grown to Rs530 billion as against the previous position of Rs508 billion, according to officials who attended the meeting.

Dar directed the secretary water and power to take further steps to reduce the amount of circular debt of DISCOs and make people aware how they could reduce their bills substantially by conserving electricity during peak hours, said the official handout.

The federal minister further directed the secretary to reduce line losses from the figure approved by the National Electric Power Regulatory Authority. Currently, the power distribution companies are incurring losses more than the threshold allowed by the power sector regulator, which is yet another reason behind the circular debt.

The meeting also discussed the proposal of feeder-to-feeder implementation to reduce line losses. The proposal has been given by Special Assistant to Prime Minister Musadik Malik.

According to the model they have been following, the Lahore Electricity Supply Company will be able to reduce line losses in the range of 5.5% to 6.5% for non-industrial connections and 1.5% for industrial connections by mid-October, according to the finance ministry handout. This exercise is expected to save Rs180 million monthly on a sub-division level and, if extended to the feeder level, the reduction in losses has been estimated at Rs1 billion per month.

The committee has asked the ministry to implement feeder-to-feeder model in areas where the line losses are high such as in Khyber Pakhtunkhwa and Sindh. The line losses in the jurisdiction of power distribution companies like Faisalabad, Lahore, Islamabad and Gujranwala are far better than other power distribution companies.

The finance minister directed Malik to put together teams for the implementation of this plan and replicate the model in one of the DISCOs in Sindh, stated the handout.

Published in The Express Tribune, September 10^th, 2014.

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