Rs80b settlement plan in jeopardy

AGP reluctant to conduct pre-audit of firms to make way for payment

ISLAMABAD: The Rs80 billion plan to settle circular debt suffers delay as the Auditor General of Pakistan is reluctant to conduct pre-audit of the debt to make way for the payment.

The Economic Coordination Committee (ECC) of the cabinet had approved the plan on March 7 and decided to immediately pay Rs80 billion to power producers and fuel suppliers, out of Rs526 billion worth of dues aimed at easing their financial constraints.

However, a senior official of the Ministry of Energy (Power Division) said that after the approval of the debt settlement plan, the Power Division had approached the auditor general to conduct pre-audit of the circular debt for paying the amount to different energy firms.

However, the auditor general was reluctant to conduct pre-audit and was not responding to the Power Division.



On coming to power in 2013, the incumbent government had cleared Rs480 billion in the power sector debt in one go, but this time around the ECC is more cautious and only wants to clear the invoice-based energy cost.

The auditor general at that time had raised objection to payment of huge amount and said it was released to the energy companies without conducting the audit of dues against each company.

The Ministry of Energy official said that the objection raised by the auditor general had led to a controversy and even the National Accountability Bureau (NAB) had taken notice of the issue. This time, he added, the Power Division wanted the auditor general to conduct pre-audit of the dues but it had not been responding to the Division for 10 days.



The official said the auditor general was jeopardising the debt settlement plan and a delay in payment to power producers would lead to aggravating the loadshedding situation in the country. He said that power plants were facing a difficult situation due to the circular debt, adding that after the payment of Rs80 billion, the government would be able to manage the circular debt to some extent.

The official said a further delay in the payment would lead to shutting down of the power plants which would, in turn, lead to increase in loadshedding in different parts of the country.

The Rs80 billion debt would be cleared after obtaining loans from commercial banks and the cost of debt servicing would be recovered from consumers through monthly bills. The consumers would pay 43 paisa per unit to service the debt.



The circular debt totalled Rs526 billion as of December 2017, including Rs312 billion energy cost and Rs214 billion capacity charges, liquidity damages and loan mark-up.

The Rs480 billion circular debt payment of 2013 is currently under investigation by NAB.

A probe by the Senate Standing Committee on Finance has already established more than Rs62 billion worth of undue payments to the independent power producers (IPPs).