Circular debt problem presents a serious bottleneck in the operation cycle of energy production and distribution
LAHORE: Around two and a half years have passed since the PML-N took over the reins of the country after promising the people of Pakistan that it would solve the problem of energy shortage and end power outages. That has still not happened and is not likely to happen until the issue of circular debt isn’t resolved permanently. I believe that the circular debt problem presents a serious bottleneck in the operation cycle of energy production and distribution. Electricity producers cannot produce electricity regularly and efficiently unless their debts are cleared by the purchasers, i.e., the country’s power distribution companies. The power distribution companies, on the other hand, can’t pay their dues to electricity producers because the former’s customers don’t pay their bills regularly.
Thus we are faced with a vicious unending cycle. It is the responsibility of the government to fix the problem by removing bottlenecks wherever they exist. In any business operation, generally speaking, the terms of trade debts range from 30 days to a maximum of 120 days. It is surprising that the present government was able to pay off the circular debt accumulated by the time it came to power in June 2013, which amounted to Rs482 billion. What is stopping the government now from resolving this crisis once and for all?
Ejaz Ahmad Magoon
Published in The Express Tribune, November 24th, 2015.
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