It is just a matter of matching the payables in the energy sector with the sector’s receivables to keep the circular debt under control for the time being and then gradually getting rid of it. But that would have meant improved governance which is not in the nature of at least the present PML-N government. So, a staggering Rs250 billion has been added to the outstanding dues of the Pakistan State Oil (PSO) since June 2013. This comes at a time when the Ministry of Water and Power reported to parliament that circular debt stood at Rs321 billion in June after an addition of Rs47 billion in the fiscal year 2015 alone. This was in addition to the backlog of about Rs335 billion parked in the Power Holding Company (PHCL) and now financed through debt servicing surcharge as part of the consumer tariff. In a report submitted to the Ministry of Finance, the PSO said most of its receivables emanated from non-payment by or because of public sector. For example, an amount of Rs185 billion was directly payable by government entities — Rs134 billion by generation companies, Rs14.2 billion by Pakistan International Airlines and Rs10 billion by the government as price differential claims and Rs20.5 billion by Kot Addu Power Company. One reason why the situation has deteriorated is that the government did not pass on two consecutive reductions in consumer tariff determined by the power regulator for fiscal years 2015 and 2016 as it is alleged to have facilitated the 10 distribution companies to seek stay orders from the Islamabad High Court.
Consequently, the power sector receivables had posted a 66% increase despite 27% cut in generation cost, better energy mix and purported improved governance. And the reason why the government has been taking this serious issue so lightly is because it had excluded circular debt from budgetary deficit calculations and parked it in the PHCL. Because of this sleight of hand Pakistan’s budget deficit instead of surging beyond 8.8% of GDP recorded in 2013 has dipped to an IMF-acceptable 4.3% of the GDP during the last financial year.
Published in The Express Tribune, December 7th, 2016.
Like Opinion & Editorial on Facebook, follow @ETOpEd on Twitter to receive all updates on all our daily pieces.
COMMENTS
Comments are moderated and generally will be posted if they are on-topic and not abusive.
For more information, please see our Comments FAQ